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Analyst warns silver could plunge 60% to $30 per ounce
Silver prices have soared to record highs near $90 an ounce, fueled by a nearly 200% surge over the past year, driven largely by robust industrial demand from solar panels, electric vehicles, and AI data centers. However, a stark analysis from Neo Wealth Management cautions that this rally faces severe risks, potentially triggering a 60% correction to as low as $30 per ounce if investment flows reverse and historical crash patterns repeat.
The warning draws on past downturns, such as the 58% drop in seven months during the 2008 crisis and the 46% decline over eight months in 2011, which stemmed not from weakening fundamentals but from sudden investment outflows and liquidity shocks. Applying these precedents to current levels, Neo Wealth projects prices could hit around $30 in a 2008-style liquidity crunch or stabilize near $40 in a 2011-like scenario. Recovery from such a fall might stretch into the early 2030s, underscoring the need for caution among investors entering at today's peaks.
Market structures amplify these vulnerabilities. Open interest in COMEX silver futures has climbed 17.9% year-over-year to 165,805 contracts, while retail-focused micro-contracts have exploded 238%, signaling heavy leveraged speculation prone to rapid unwinding. Silver trades in backwardation, with spot prices exceeding futures, hinting at short-term physical tightness. Yet Neo Wealth notes this could vanish swiftly: liquidating just 10% of silver-backed ETP holdings would erase the 2025 supply deficit and eliminate the backwardation.
Urgency heightened after a flash crash on January 8, when prices tumbled over 5% in one session amid a 47% hike in CME Group margin requirements for silver futures. In a worst-case stress test, Neo Wealth envisions global investment demand collapsing, flipping a projected 120 million ounce shortfall into a 216 million ounce surplus. Even then, fundamental price floors might hold at $61 per ounce based on demand elasticity models, with technical support between $40 and $50, and a ultimate bottom of $25 to $30 tied to global mining economics, below which nearly half of world silver production turns unprofitable.
Industrial demand accounts for 59% of total silver consumption, propelled by solar, EVs, and AI infrastructure, with forecasts from BMI a Fitch Solutions unit predicting ongoing deficits through 2026. Still, silver's high-beta nature means it typically falls 2.5 times faster than gold during market stress, amplifying downside risks for this volatile commodity.
