Silver is consolidating at high levels. Will the brief pullback present an opportunity to buy on dips?
2025-12-09 00:32:09
On Monday (December 8th) during the US session, spot silver weakened slightly, with price fluctuations remaining within Friday's range, indicating that the market has entered a consolidation phase after a surge. Traders neither aggressively shorted to suppress silver prices nor rushed to chase the rally above $59.34. This hesitant stance is noteworthy, especially considering the previous week's low of $56.46 and the short-term support/resistance level of $53.99, both key levels for determining the market's next move.
ETF buying provided substantial support for the rise in silver prices.
The core driver of this rally lies in the strong demand in the ETF market. In the first four trading days of December, the increase in silver ETF holdings exceeded any single-week level since July—even with silver prices nearing historical highs, funds continued to pour in to establish silver exposure. This inflow directly tightened the supply of physical silver, and concentrated buying during market consolidation phases typically indicate that funds are buying on dips rather than taking profits. Strategists have warned that in the current tight supply market, continued large-scale ETF buying could exacerbate short covering. This risk should be closely monitored if silver prices continue to consolidate below $59.
Industrial demand remains strong.
It goes without saying that silver possesses both commodity and financial attributes. Currently, the solar energy manufacturing industry accounts for approximately 20% of global annual silver consumption, and the pace of global renewable energy infrastructure development shows no signs of slowing down. Silver demand from the photovoltaic industry alone is expected to reach a record high in 2025. This demand pattern is unlikely to change in the short term. Furthermore, industrial buyers tend to enter the market when silver prices correct, and this continuous absorption of physical silver is a significant reason why short sellers have been unable to push silver prices down substantially.
The sluggish growth on the supply side is unlikely to change.
On the supply side, mining companies are facing the dual pressures of depleted mineral reserves and rising extraction costs, and new mining projects often take several years from construction to reaching effective production capacity. The silver market may be facing its fourth consecutive year of supply shortage, with above-ground inventories already at multi-year lows. Ultimately, in a tight supply market environment, even a small increase in demand can significantly boost prices. This is one of the reasons why silver prices have doubled this year—the market has finally begun to price in this tight supply-demand balance.
The policy environment provides strong support.
A loose monetary environment remains a significant positive factor for rising silver prices. Silver tends to perform well during central bank interest rate cut cycles due to its dual attributes as both an industrial metal and a store of value. If major central banks maintain loose monetary policies while fiscal stimulus continues, silver's multifaceted nature will continue to attract buyers. Furthermore, with current geopolitical risks remaining high, some funds are shifting towards silver, a relatively cheaper safe-haven asset compared to gold.
Short-term market trend analysis
(Spot silver daily chart source: EasyTrade)
The current pullback in silver prices is more likely a temporary pause in an upward trend than a trend reversal. Continued buying on dips, coupled with substantial support from ETF buying, limits the downside potential for silver. A break above the $59.34 resistance level could open up further upside potential, but this breakout requires confirmation from trading volume. If bears push silver prices into a deeper pullback, $56.46 and $53.99 will be key support levels testing the confidence of bulls.
At 00:27 Beijing time, spot silver was trading at $57.947 per ounce, down 0.53%.
ETF buying provided substantial support for the rise in silver prices.
The core driver of this rally lies in the strong demand in the ETF market. In the first four trading days of December, the increase in silver ETF holdings exceeded any single-week level since July—even with silver prices nearing historical highs, funds continued to pour in to establish silver exposure. This inflow directly tightened the supply of physical silver, and concentrated buying during market consolidation phases typically indicate that funds are buying on dips rather than taking profits. Strategists have warned that in the current tight supply market, continued large-scale ETF buying could exacerbate short covering. This risk should be closely monitored if silver prices continue to consolidate below $59.
Industrial demand remains strong.
It goes without saying that silver possesses both commodity and financial attributes. Currently, the solar energy manufacturing industry accounts for approximately 20% of global annual silver consumption, and the pace of global renewable energy infrastructure development shows no signs of slowing down. Silver demand from the photovoltaic industry alone is expected to reach a record high in 2025. This demand pattern is unlikely to change in the short term. Furthermore, industrial buyers tend to enter the market when silver prices correct, and this continuous absorption of physical silver is a significant reason why short sellers have been unable to push silver prices down substantially.
The sluggish growth on the supply side is unlikely to change.
On the supply side, mining companies are facing the dual pressures of depleted mineral reserves and rising extraction costs, and new mining projects often take several years from construction to reaching effective production capacity. The silver market may be facing its fourth consecutive year of supply shortage, with above-ground inventories already at multi-year lows. Ultimately, in a tight supply market environment, even a small increase in demand can significantly boost prices. This is one of the reasons why silver prices have doubled this year—the market has finally begun to price in this tight supply-demand balance.
The policy environment provides strong support.
A loose monetary environment remains a significant positive factor for rising silver prices. Silver tends to perform well during central bank interest rate cut cycles due to its dual attributes as both an industrial metal and a store of value. If major central banks maintain loose monetary policies while fiscal stimulus continues, silver's multifaceted nature will continue to attract buyers. Furthermore, with current geopolitical risks remaining high, some funds are shifting towards silver, a relatively cheaper safe-haven asset compared to gold.
Short-term market trend analysis
(Spot silver daily chart source: EasyTrade)
The current pullback in silver prices is more likely a temporary pause in an upward trend than a trend reversal. Continued buying on dips, coupled with substantial support from ETF buying, limits the downside potential for silver. A break above the $59.34 resistance level could open up further upside potential, but this breakout requires confirmation from trading volume. If bears push silver prices into a deeper pullback, $56.46 and $53.99 will be key support levels testing the confidence of bulls.
At 00:27 Beijing time, spot silver was trading at $57.947 per ounce, down 0.53%.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
