Silver prices plummet from $84 to $71: Why did the market suddenly reverse?

On the 28th, silver touched a record high of $83,987/ounce before experiencing a rare sharp correction on the 29th. According to trading data, silver prices plummeted by 9.2% from the peak, with the intraday low reaching $71,877/ounce. By 6 PM, the decline narrowed to 8%, with prices stabilizing around $72.8. The Chicago Mercantile Exchange March futures contract quoted at $72,345/ounce.

China’s Demand Surge Triggers Supply Alerts

Behind this surge in silver prices is an unprecedented investment enthusiasm from China. According to Bloomberg, the premium of silver prices in the Shanghai market over the London spot market is as high as $8/ounce— the largest recorded spread. This abnormal phenomenon has directly led to the suspension of new customer subscriptions for China’s only pure silver investment fund, despite multiple prior risk warnings issued by the fund.

The Chinese government and market participants have taken a series of measures to curb excessive demand, from tightening trading rules to issuing price risk alerts, but these have failed to dampen investor enthusiasm. Notably, China announced export restrictions on silver as early as the end of October. Elon Musk commented on X platform that this “is not very appropriate,” citing silver’s essential role in many industrial processes.

Potential Risks in the Supply Chain

Currently, silver inventories are approaching historic lows, indicating that a global supply shortage could spread across multiple industries. Demand is highest among solar panel manufacturers, data center operators (especially AI infrastructure), and electric vehicle producers. If supply remains constrained, the cost pressures on these key industries will significantly increase.

Why Has Silver Become the New Favorite?

Despite the intense correction on the 29th, silver prices have still risen over 150% since the beginning of the year— soaring from about $29/ounce to the current level. This growth trajectory reflects a renewed recognition among global investors of silver as a hedge asset. Against the backdrop of escalating geopolitical tensions and expanding U.S. debt, silver, like gold, is viewed as a safe haven.

Additionally, expectations of a weakening dollar have strengthened demand for precious metals. The weaker the dollar, the cheaper precious metals priced in dollars are for overseas buyers, further stimulating international purchasing power. Gold also experienced a similar correction on the 29th, falling 3.5% from its record high of $4546.46/ounce on the 28th to around $4374.