"Silver Rhapsody" enters high volatility chapter? Silver quickly plunges after reaching a historical high of $84, dropping over 3%

The trading price of the most crazy precious metal of this year - silver, continued to climb to a record high, breaking the barrier of $80 per troy ounce for the first time in history on Monday and reaching a high of $84, continuing the latest round of historical year-end frenzy. However, the spot price of silver plummeted straight after reaching a historical high of $84 per ounce earlier in the Asia market on Monday, highlighting the profit-taking momentum of speculative funds. At the same time, with the RSI indicator reaching a technical correction point, the volatility of silver may become more intense. Currently, the spot price of silver rapidly shifted from a 6% increase to a 3% decrease, settling at $76 per ounce. Short-term gold prices also dropped quickly due to the plunge in silver prices, falling below $4500, a decrease of about $50 from the daily high. This white metal has risen for the sixth consecutive trading day, with a cumulative increase of about a quarter - the largest six-day limit increase on record since 1950. The recent rise has been driven by speculative fund inflows and the lingering supply mismatch of the Hub Group, Inc. Class A - a major global commodities trading platform, following a short squeeze event in October. Gold, silver, and other platinum group metals have shown significant strength this year, mainly driven by large-scale purchases by global central banks (primarily of gold), as well as continuous inflows of funds from global precious metal exchange-traded funds (ETFs) and strong support from the Federal Reserve's consecutive three recent interest rate cuts. Generally, lower borrowing costs are very favorable for these non-interest-bearing commodities, and traders are betting that the Federal Reserve will continue to cut interest rates 2-3 more times by 2026. As shown in the chart above, silver has become increasingly crazy this year, with an astonishing 165% increase in price so far this year, and silver, which has long lagged behind gold, is further outperforming gold - silver has risen over 25% in the past six trading days. "Without a doubt, we are witnessing a generational bubble in the silver market," said market analyst Tony Sycamore from IG Australia. Technical indicators suggest that the rise in silver prices may be too rapid and excessive. The metal's 14-day relative strength index (RSI) reading is close to 80, far above the "overbought" threshold of 70. The unexpected outperformance of silver compared to gold is attributed to various reasons, with the core logic being the escalating political conflict between the US and Venezuela's GEO Group Inc, supply tightness, and liquidity threats. First, the silver market has a relatively small supply. Both inventory and liquidity are tight, and liquidity may quickly evaporate; the London gold market has approximately $700 billion in gold reserves that can be borrowed during periods of tight liquidity, but silver does not have similar reserves. A historical supply shortage occurred last October. A weak US dollar is also a core driving factor for the continuous rise in prices of gold, silver, and other precious metals. The Bloomberg US Dollar Spot Index - a key indicator of the strength of the dollar, has fallen by over 10% this year and fell nearly 1% last week - the largest weekly decline since June. A weaker US dollar is generally very favorable for the trends of gold and silver. Exceeding Apple Inc., Microsoft Corporation! Silver ranks among the top three global asset market capitalizations The latest statistics show that silver has become the third most valuable asset globally, only behind gold and NVIDIA Corporation (NVDA.US) in terms of total market value, leaving behind tech giants such as Apple Inc. (AAPL.US), Alphabet Inc. Class C (GOOGL.US), and Microsoft Corporation (MSFT.US). According to CompaniesMarketCap statistics, the market value of silver once reached $4.485 trillion; while the total market value of gold assets ranked first at $31.719 trillion, followed closely by chip giant NVIDIA Corporation at $4.638 trillion, with NVIDIA's market value reaching $5 trillion at some point during the year. With silver reaching historical highs in recent times, on December 27th, Musk expressed concerns about the situation, stating that it is "not good for global industrial development". Musk made the latest comments on the social media platform X. In response to the hot discussions about the explosive growth in silver trading prices due to "severe global supply shortages", Musk commented, "This is not good. Silver is needed in many industrial processes." Statistics show that the global silver market has been in a structural deficit for five consecutive years, with physical inventories rapidly depleting and inventory levels at major exchanges significantly declining. The market is facing a real-time supply squeeze, rather than just a rise driven by risk aversion sentiment. In 2025, global silver demand reached 1.24 billion ounces, while supply was only 1.01 billion ounces, indicating a supply gap of 100 to 250 million ounces. This supply-demand gap is described as a "structural deficit" without any signs of quick repair. The core reason for this situation lies in the rigidity of global mining supply. Silver extraction is mostly a by-product of copper and zinc mining, with new mines usually taking more than 10 years to develop, and the quality of ore is declining. At the same time, the incremental amount of recycled silver is not sufficient to fill this gap, causing the supply side to appear weak in the face of surging demand. A more serious signal comes from the dramatic drop in inventory data. Since 2020, silver inventories on COMEX (New York Mercantile Exchange) have decreased by 70%, and silver inventories in the London Metal Exchange (LME) warehouses have decreased by 40%. At the current pace of demand, available silver inventories in some regions can only sustain for 30 to 45 days. Silver breaking $100 is not a dream? In summary, the core logic behind the recent strong rise in silver prices is: "Expectations of a decline in the Federal Reserve benchmark interest rate on a macro level + structural supply tightness + strengthening industrial growth narrative + momentum funds/speculative forces/FOMO (fear of missing out) sentiment" jointly pushing silver prices into an unparalleled "precious metal acceleration phase". The repricing of industrial demand narrative can be seen as a novel logic behind this surge in silver prices, as noted in the latest research report by the Silver Institute: the rapid expansion of AI data centers, the trend of electrification/new energy (including photovoltaics), the global shift towards electric vehicles, along with ongoing supply-demand gaps, have positioned silver as not just "following gold". The Silver Institute states that the 17% compound annual growth rate of the solar industry, 13% compound annual growth rate of the electric vehicle industry, and the explosive expansion of global AI data centers together constitute the three pillars driving the growth in silver demand. The Silver Institute's report forecasts that these industries will continue to boost demand for silver in the industrial sector by 2030, with a focus on the fact that global data center IT power capacity has grown from 0.93 gigawatts in 2000 to nearly 50 gigawatts by 2025, an increase of 53 times. The institute emphasizes that this exponential growth implies a need for larger-scale servers, switches, and cooling systems globally, all of which require silver as a core component. The Silver Institute emphasizes that silver's massive penetration and application in data centers are based on three key characteristics: highest electrical conductivity ensures minimal energy loss in power transmission to servers, crucial for data centers requiring 99.999% uptime; outstanding thermal conductivity helps equipment maintain a safe temperature range, reducing cooling energy consumption (cooling systems accounting for 7-30% of data center total energy consumption); high anti-corrosiveness protects components in high electrical load and temperature fluctuation environments. To some experienced commodity analysts and traders focused on commodities, the recent surge in silver prices lays an important foundation for silver to break through the super barrier of $100 per ounce, but they also generally agree that silver challenging/hitting $100 per ounce is an "extreme bull market target". Philippe Gijsels, a senior strategist at BNP Paribas, believes that with the downward trend in the Federal Reserve's rate-cut cycle and the strong momentum of market enthusiasm, the upward trend in silver prices will continue until 2026, and he expects gold to reach $100 per ounce by the end of 2026. Keith Neumeyer, CEO of First Majestic, has publicly expressed his long-term prediction of silver prices in the three-digit range (above $100 per ounce) several times this year. Paul Williams, Managing Director of Solomon Global, stated that silver's dual properties as an industrial metal and a store of value continue to attract global inflows of funds, reinforcing the support for a long-term bull market. Williams had predicted silver would hit $50 by the end of 2026 when silver was close to $50 in October.