During early Asian trading on Friday, silver prices opened sharply lower, reflecting weak global cues. Although bargain buying emerged at lower levels, experts caution that such rebounds may only be temporary.
Why Silver Prices Are Under Pressure
According to market analysts, easing geopolitical tensions and a strengthening US dollar are the key reasons behind the recent weakness in silver prices. The decision by the United States and Iran to initiate fresh nuclear talks has reduced safe-haven demand for precious metals.
A stronger US dollar typically weighs on commodity prices, including silver and gold, as it makes them more expensive for holders of other currencies. The US Dollar Index continues to remain elevated, limiting upside potential for precious metals.
Experts note that recent price recoveries are largely driven by short-term profit booking in the dollar rather than any fundamental shift in silver demand.
Industrial Demand Shift Weakens Bullish Case
One of the biggest concerns for silver bulls is the gradual decline in industrial demand. With prices soaring in recent months, several industries have begun exploring cost-effective alternatives.
In the renewable energy sector, manufacturers of photovoltaic cells are increasingly replacing silver with copper. Similar transitions are being explored in solid-state battery technology, where companies in countries such as China, Taiwan, Israel, and Australia are actively reducing silver usage.
Analysts argue that industries can absorb higher raw material costs only to a certain extent. Once prices become economically unviable, substitution becomes inevitable.
Lessons From History
Market veterans advise investors to look at historical precedents before expecting fresh highs. Silver has witnessed sharp crashes after strong bull cycles in the past.
In 1980, silver prices collapsed after regulatory tightening triggered a liquidity squeeze. A similar pattern emerged in 2011, when prices plunged nearly 75% after reaching peak levels.
Recently, global exchanges have raised margin requirements for silver trading, a move that could further curb speculative interest.
How Low Can Silver Prices Go?
Experts believe silver prices could correct between 75% and 80% from peak levels over the next two years. However, the fall is expected to be volatile rather than linear, with intermittent rebounds along the way.
Analysts estimate that international silver prices could eventually stabilise in the range of $25 to $30 per ounce, provided current macroeconomic trends persist.
Investors are advised to remain cautious and avoid chasing short-term price recoveries without clear confirmation of trend reversal.
Investor Caution Advised
Given the uncertain outlook, market experts recommend a disciplined approach towards silver investments. Factors such as global monetary policy, currency movements, and industrial demand trends will continue to influence price direction.
