Key Takeaways:
Spot silver fell 3.7% to $72.13 an ounce, extending a decline from January's record above $120 as analysts warned that last year's 140% rally has begun deterring industrial buyers.
"Demand erosion is likely to persist as long as prices remain at current levels," UBS analysts wrote in a May 22 note. Unlike gold, which benefits from central bank buying, silver lacks that strategic demand anchor and is more vulnerable to shifts in private investment and industrial demand, they said.
Silver's surge to an all-time high of $120 on Jan. 28 was followed by a single-day crash of almost 30%. The metal bottomed at $67.60 on March 20, recovered to about $87 by mid-May, then slid back to the mid-$70s. Front-month U.S. silver futures settled at $72.16, also down 3.7%.
HSBC analysts called silver "fundamentally overvalued" and said the gold-to-silver ratio is likely to widen, allowing silver to ease even if gold rallies. Macquarie strategists see little scope for a recovery, with the Federal Reserve expected to hike rates in the first half of 2027, adding downward pressure on precious metals. "Whilst we expect average silver prices to remain around this level for the rest of the year, volatility will remain until the situation in the Middle East is resolved," Macquarie wrote in a May 21 note.
Silver's wide range of industrial uses — from computers and mobile phones to solar panels and cars — makes it more sensitive to the economic cycle than gold. UBS said the elevated price levels are beginning to weigh on demand across various industries, and the current investment case does not sufficiently reward investors for the associated volatility.
Silver at $72.13 is about 40% below its January peak of $120 and roughly in line with levels last seen before the Iran conflict drove prices higher. The metal's 52-week range spans from $67.60 to $120, with the current price sitting near the midpoint of that band.
This article is for informational purposes only and does not constitute investment advice.
