Silver prices have faced pressure due to the CME raising margin requirements on Silver futures. The price has fallen to around $72.50, losing a 4.5% gain from the previous session. This decline is more about traders adjusting their positions than a drop in Silver demand. Even with this drop, Silver is still expected to see over a 150% annual gain in 2025. This forecast is driven by geopolitical tensions, potential US interest rate cuts, and strong demand from the solar and electronics sectors. High demand in China has pushed premiums on the Shanghai Futures Exchange to record highs, indicating strong local demand and impacting global supply chains. Minutes from the Federal Open Market Committee (FOMC) meetings suggest they may pause rate cuts if inflation decreases. Previous cuts aimed to support the labor market. Demand for Silver has increased as a safe haven amid geopolitical tensions, like uncertainties over the Russia-Ukraine peace talks and issues in the Middle East. Silver’s industrial uses greatly influence its price, particularly from the electronics and solar sectors. Tariffs from US President Trump, geopolitical worries, and interest rate cuts have helped lift Silver prices. Often, Silver and Gold prices move together, and factors like the strength of the US Dollar, investment demand, and mining supply impact their changes. The recent dip to about $72.50 is mainly due to the CME’s margin increase, not a fundamental market change. This has forced some leveraged traders to exit, creating a temporary pricing dislocation. The underlying demand that pushed Silver prices up over 150% in 2025 is still strong. With implied volatility rising, we view selling out-of-the-money puts for January and February as an attractive strategy. This lets us collect higher premiums while setting a lower entry point to invest in this bull market. For example, data from the Cboe shows Silver volatility is now at its highest levels since the market surge in 2020. It’s important to note that industrial demand for Silver is stronger than ever, shielding it from changes in monetary policy. The Silver Institute’s upcoming 2025 report is expected to reveal that demand from solar PV installations alone used over 240 million ounces, a nearly 25% increase year-over-year. This steady demand provides a solid price foundation that wasn’t present in earlier bull markets. The FOMC’s discussions about pausing rate cuts are now the key risk to watch in the first quarter of 2026. Although the Fed has already cut rates three times in 2025, the Consumer Price Index (CPI) report for December will be crucial. If the mid-January CPI report comes in below the recent trend of 3.2%, it might lead the Fed to hold off on further cuts, capping Silver’s rally. We are also keeping an eye on the gold-to-silver ratio, which has narrowed significantly during this bull run. Starting 2025 near 85, the ratio is now approaching 60, its lowest in several years. While this indicates Silver’s strong performance, traders should be cautious, as a return to historical averages could favor Gold in the short term.

here to set up a live account on VT Markets now