Silver’s Sharp Correction Following Record Rally

Silver markets are navigating turbulent waters as prices undergo a significant downward adjustment. The precious metal has retreated to $50.50 after reaching an unprecedented peak of $54.48 in October, representing a decline exceeding 7% within just days. November 13 alone witnessed a substantial single-day drop of 7.12%. Market participants now question whether this marks the conclusion of the rally or merely a temporary pause.

Market fundamentals reveal concerning supply-demand dynamics. The Silver Institute warns of potentially five consecutive years of supply shortfalls through 2025, with an anticipated deficit of 95 million ounces expected next year.

Critical market metrics illustrate the situation:

• Global demand has decreased by 4% to 1.12 billion ounces
• Mining output remains stagnant at 813 million ounces
• The accumulated deficit from 2021-2025 approaches 820 million ounces
• Industrial consumption has declined by 2% to 665 million ounces

Profit-Taking Accelerates Price Decline

Following an extraordinary 67% year-to-date surge through early November, substantial profit-taking has emerged. Investors are capitalizing on gains achieved during the remarkable upward movement. Despite the recent correction, silver maintains a formidable position, trading 67% above its value from the same period last year.

The central question facing market observers is whether the metal can withstand ongoing selling pressure.

Investment Demand Reaches New Heights

Institutional interest in silver has reached unprecedented levels. Holdings in silver-backed exchange-traded products surged by 18% to 187 million ounces, marking the most significant increase since 2020. The gold-silver ratio declined from 107 in April to 78 by October, reaching its lowest point since July 2024.

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Simultaneously, CME warehouse inventories have accumulated a record-breaking 526.1 million ounces—nearly equivalent to four years of United States domestic consumption. Extreme market tightness in London has driven leasing rates above 11%.

Industrial Consumption Patterns Shift

A paradoxical development has emerged in industrial usage. Despite record-breaking photovoltaic installations, silver consumption in solar panel manufacturing has fallen by 5%. Elevated prices have compelled producers to dramatically reduce silver content per module.

Offsetting this reduction, demand from artificial intelligence data centers, expanding electric vehicle sales, and resilient electronics manufacturing has provided market stability. Whether these sectors can fully compensate for the structural supply deficit remains uncertain.

US Trade Policy Intensifies Market Pressures

The classification of silver as a "critical mineral" by the US Department of the Interior has heightened market tensions. This designation opens the possibility of trade restrictions under Section 232 authority, increasing strain on global supply chains.

This regulatory development raises fundamental questions about future metal availability, pushing silver markets into uncharted territory as they balance between investment enthusiasm and industrial requirements.