The trend of silver after the single-day earthquake became a mystery: six key signals to look into the future market game
The Zhitong Finance App noticed that in recent days, abnormal fluctuations in silver have attracted the attention of the times — even Elon Musk and others have begun to pay attention to the ferocious rise of this metal towards historic highs.
Silver prices surged to record levels above $84 per ounce in early Monday trading, then quickly plummeted to close to $70 in light post-holiday trading. This is one of the biggest price reversals in silver history.
Since this year, the increase in silver prices has remained around 140%. The big question now is: What is the next trend of silver?
Below are key charts for observing the silver market to assess subsequent developments.
Buying in China
Surging interest from Chinese investors is the main driving force behind the recent rise in silver prices. Speculators are flocking to buy this precious metal, which is in line with the dynamics of the platinum market. In December, the purchase volume of silver contracts on the Shanghai Gold Exchange climbed, pushing premiums to record highs and driving other international benchmark prices.
After multiple risk warnings were ignored, the fierce rebound forced China's only pure silver fund to turn down new clients last week. The fund manager announced this unusual move last Friday. Previously, many actions, from tightening trading rules to cautionary suggestions for “unsustainable” increases, failed to quell the investment frenzy fueled by social media.
ETF inflows
This year, physically-backed silver exchange-traded fund (ETF) holdings surged, adding more than 150 million ounces. Although the total amount of metal held by these funds is still below the peak set during the Reddit-driven retail investment wave in 2021, capital inflows played a key role in eroding already tight market supply. According to calculations, this year, except for one month, the holdings of these funds have been increasing every month.
Technical indicators and security deposits
In December alone, the price of silver rose by more than 25%, which is expected to be the biggest monthly increase since 2020. This rapid rise means that some technical indicators are signaling that prices are rising too fast and too high. Silver's Relative Strength Index (RSI) — an indicator that measures trading momentum — has remained above 70 for most of the past few weeks. A reading above 70 usually indicates that too many investors bought the asset in a short period of time.
Some exchanges are taking action to control risk in the face of increased volatility. Margins for some Comex silver futures contracts will be raised starting Monday, according to a statement from CME. This increases market resistance as traders need to invest more capital to maintain their positions. Some speculators are reluctant to do this and are therefore forced to reduce or close their positions.
Options frenzy
One sign of a speculative boom is the level of purchases of silver futures and bullish options in related ETFs. Call options give buyers the right to buy securities at a predetermined price, and are often seen as a cheap way to bet on a rise in the market.
For the largest silver ETF, iShares Silver Trust (SLV), its total open call options contracts reached their highest level since 2021 this week. Compared to put options that prevent falling prices, the cost of buying silver futures call options has also jumped to historic highs in recent weeks.
Borrowing costs
Due to tariff-related trade factors, most of the world's available silver remains in New York warehouses. Meanwhile, the market is still awaiting the results of the US “232 investigation” on key minerals, which could result in tariffs or other trade restrictions on the metal.
Due to the influx of metals into the US, the London market was completely “emptied” in October, and borrowing costs in the London market are still far above normal levels close to zero. This paved the way for increased volatility and frequent price surges.
Chasing gold
Overall investment demand for precious metals surged this year, supported by factors such as the weakening dollar, President Donald Trump's aggressive moves to reshape global trade, and threats to the independence of the Federal Reserve.
Gold was the first to rebound and additionally benefited from strong buying by central banks around the world. Some market observers believe there is a rule of thumb: when gold makes a decisive change, silver will eventually move twice as far in the same direction — of course, they were right this year.
Many investors also track the price comparison between these two commodities. After the initial surge in gold at the beginning of this year, the gold to silver ratio expanded above 100:1, sending a signal to some people to buy silver. However, in recent weeks, this rate has declined rapidly.
