The price of silver is undergoing a significant pullback, shedding approximately 3% to trade below $92 per ounce. This correction follows an unprecedented rally that saw the metal surge to a historic high of $95.87 earlier this week. The shift in momentum is largely attributed to a reduction in safe-haven demand after U.S. President Donald Trump dialed back tariff threats against European nations and ruled out military action in the Greenland dispute during discussions in Davos. This prompted a powerful rally in equity markets, with the Dow Jones Industrial Average soaring 722 points, drawing capital away from perceived safe assets.
Key Market Data:
* Current price decline: from $95.87 to approximately $91 per ounce, a drop of 3.6%.
* Year-to-date performance for 2025: a gain of 148%. Year-over-year increase: 198%.
* Market capitalization: $5.35 trillion, establishing silver as the world’s second-largest asset class.
* The global market has been in a supply deficit for four consecutive years.
* The paper-to-physical ratio on futures markets remains extreme at 356:1.
Structural Supply Shortages Provide Long-Term Support
Despite the short-term price correction, the fundamental driver behind silver’s powerful rally remains firmly in place. The physical market is grappling with a persistent structural shortage, now in its fourth year. The cumulative supply deficit over this period has reached a staggering 678 million ounces. Refining capacity is strained, with facilities like Dillon Gage Metals in Texas operating 24-hour, three-shift schedules to meet demand.
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Industrial consumption now accounts for 60% of annual global silver production, underpinning long-term demand. The extraordinary paper-to-physical ratio highlights a precarious market structure: for every single physical ounce of silver, there are 356 paper claims. Major banks hold short positions worth $4.4 billion, a liability that would require years of mine production to cover if called upon.
Retail-Driven Squeeze Meets a Stable Rate Environment
A significant force in the current market is a retail-driven buying surge, particularly from investors in China, India, and the Middle East. Unlike the meme-stock phenomenon of 2021, this movement is occurring alongside tangible structural tightness in the physical metal. With its $5.35 trillion market cap, silver has now surpassed the valuation of tech giants NVIDIA ($4.53 trillion), Apple, and Microsoft. Only gold, at $32.5 trillion, holds a higher value among global assets.
In the near term, the monetary policy outlook may exert pressure. The U.S. Federal Reserve is expected to maintain stable interest rates through the end of Chair Jerome Powell’s term in May. A combination of steady rates and a robust equity market rally can reduce the immediate appeal of non-yielding assets like silver. However, the underlying physical scarcity is unresolved. Any renewed escalation in currency markets or global trade policy could swiftly propel the metal back toward the psychologically significant $100 threshold.
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