Spot and futures prices set records

On December 3, the spot gold price in London remained strongly volatile above $4,200 per ounce. It declined slightly by 0.6% compared to the previous trading day, but overall it still remained in the historical high range. The international silver price hit a new all-time high again: The performance of the spot silver price in London was remarkable, reaching a maximum of $58.945 per ounce during the session, setting a new historical record; The silver futures on the New York COMEX even strongly broke through the $59 per ounce mark, reaching a maximum of $59.655 per ounce during the session, hitting a new all-time high.

In China's precious metal futures market, on December 3, the main contract of the Shanghai Futures Exchange silver futures closed at 13,582 yuan/kilogram (13.58 yuan/gram), with a cumulative increase of 9% from December 1 to 3. The silver inventory of the Shanghai Futures Exchange on that day was 476 tons, which was at a relatively low level. The trading volume of more than 2.66 million lots and the open interest of 458,000 lots indicate that the market trading was very active that day. On the same day, the quotation of silver T+D of the Shanghai Gold Exchange was 13,538 yuan/kilogram (13.54 yuan/gram), with a three-day increase of more than 9%, and the price also reached a new high.

In this round of breakthrough and upward trend, the silver market shows four major characteristics. First, since this year, the price increase of silver has exceeded that of gold, becoming the most dazzling star in the domestic futures market. Second, the interconnection between the domestic and foreign silver markets is unprecedentedly close, with the correlation coefficient between the Shanghai Silver Futures and the COMEX Silver Futures prices above 0.96. Domestic investors of different types actively participate in various types of transactions of domestic silver futures in combination with the fluctuations of the overseas silver market. Third, the volatility of silver futures has soared to 60%, far exceeding the historical average, especially since October, silver has shown violent fluctuation with a single day's increase or decrease of more than 5%. Fourth, the phenomenon of silver spot premium has appeared continuously, and even the highest premium in the spot market has exceeded 5%, intuitively reflecting that there is indeed a new pattern of supply shortage and demand increase in the global physical silver market in the second half of this year.

Supply and demand changes are the core driver

The continuous rise in silver prices is the result of the imbalance between supply and demand for physical silver, the shift in the US Federal Reserve's monetary policy, and the influx of a large amount of global capital into the market. Of course, the expanding supply and demand gap for physical silver is the core factor supporting this bull market for silver. Global mine production of silver is expected to decrease to 820 million ounces (about 2580 tons) in 2025, a 12% decline from the 2020 peak. The global amount of recycled silver feedstock (old jewelry, industrial catalysts, electronic products, etc.) in 2025 is only 1.2% higher, at 197 million ounces (about 614 tons), which, although a new 13-year high, is a modest increase and far below the increase in industrial demand. The rigid constraints on the supply side have made silver a "rare commodity" in 2025.

The explosive growth of global silver demand in 2025 is the core of the core. The photovoltaic industry has become the largest "silver consumer", with the global silver consumption for photovoltaics reaching 75,600 tons in 2025, a doubling growth compared to 2022, accounting for 55% of the total global silver demand, completely subverting the traditional demand structure of silver. The global new energy vehicle and AI computing power server and data center fields also contribute a large increment: the silver consumption in the new energy vehicle industry reaches 25,660 tons, with an increase of more than 520 tons and an annual growth rate of over 12%; the silver consumption for AI computing power servers and data centers increases by 30% compared to traditional equipment. The acceleration of global 5G base station construction has led to an increase in the use of silver in high-frequency communication equipment, further broadening the application boundaries. The above four silver application fields together constitute the "four pillars" of global silver demand this year.

Global visible silver stocks in 2025 can only cover 1.2 months of world consumption, far below the safe boundary of 3 to 6 months. Silver stocks in London, UK, have dropped below 4,000 tons, accounting for less than 10% of global demand; China's silver stocks have also dropped to 715 tons, the lowest level in 7 years; The coverage rate of COMEX silver warehouse orders in the United States has plummeted to 23%, and the proportion of open interest contracts to monthly production has reached 9.4%, posing a risk of liquidation for silver shorts in the US market.

According to the World Silver Association data, the global demand for silver jewelry is expected to be 205 million ounces (about 6370 tons) in 2025, down about 5% year-on-year, mainly due to the high silver price; the global total investment demand for silver (silver bars and coins + ETF) in 2025 is 1.334 billion ounces (about 414,000 tons), up 8.2% year-on-year, reaching a historical high, accounting for 37% of the global total demand for silver, and has become the core force supporting the silver price.

In addition, starting in September 2025, the Federal Reserve's monetary policy shift and continuous interest rate cuts have injected a "shot of adrenalin" into the silver bull market. Coupled with the risk-aversion demand triggered by political and economic uncertainties in the United States, capital is accelerating into the European and American silver markets. The global silver ETF position has increased by more than 500 tons in half a year, and the domestic silver T+D trading volume has increased by 30% in half a year. Speculative long positions have increased by 12% in a single month after the interest rate cut in September.

Future investment strategy

As of December 2, 2025, the annual increase of silver futures on the Shanghai Futures Exchange exceeded 90%. UBS, an international investment bank, has raised the target price of silver in 2026 to $58 - $60 per ounce, and there is even a possibility of touching $65 per ounce. Citibank of the United States and Standard Chartered predict that from the fourth quarter of 2025 to the first quarter of 2026, the silver price will stabilize above $55 per ounce. The core logic is that the Fed's interest rate cut cycle has just started, and it is expected that there will be at least 2 - 3 more interest rate cut opportunities in 2026. The downward shift of the central interest rate in the United States will continue to support the global silver valuation. Moreover, the global energy transition is "striding forward", and the 35% increase in year - end production scheduling brought about by the peak season of global photovoltaic installations will continue to drive the world's silver demand. At the end of November 2025, the international gold - silver ratio was approximately 70, still having a certain distance from the historical average. If gold maintains a slight increase and the gold - silver ratio returns to the average, then theoretically, the international silver price is expected to reach $75 per ounce, and the current price still has a 20% - 30% upside potential.

In the current context of the continuous creation of new historical highs in the futures price of silver in China, the protection of futures investors and risk management are aspects that we need to pay attention to. The single-sided strategy of silver futures is vulnerable to shocks, and at this time, the silver option strategy has significantly increased its investment value due to its flexibility and risk hedging ability. Option investment strategies can flexibly respond to market uncertainties and high volatility at a low cost, achieving the effect of risk hedging and profit amplification. In addition, under the condition of increasing price fluctuations of silver, it is necessary to manage the position and funds well. For example, choose the appropriate strategy according to the risk tolerance, control the position within 30%, the proportion of silver investment funds should not exceed 50%, stop-loss and stop-profit strategies and dynamic adjustments, etc.

December risk control recommendations

At present, the global silver market is characterized by high prices and high volatility, and it is necessary to "maintain rationality" in response to the silver futures market. Whether it is institutional investors or individual investors, they need to consider comprehensively according to their asset status, investment goals, risk tolerance and other factors when allocating silver futures, avoiding blind following, rhythmless and un planned investment. Investors should buy silver in batches when trading, avoiding a one-time investment of all funds; by buying in the correction to reduce investment risk and gradually increase the position. The most important thing in trading is still risk prevention and response, and ensuring the safety of the principal is always the first priority.

Faced with the historical high of silver prices, downstream enterprises can establish a risk control system with arbitrage as the core, supplemented by rigorous position management. Enterprises should deeply understand the root causes of market fluctuations, avoid one-sided heavy position speculation, and make full use of silver options and other derivatives (such as protective or offset strategies) to protect spot or futures long positions, so as to lock in costs and increase returns.

Enterprises must set clear stop-loss points, strictly control investment positions and the ratio of capital occupied, avoid maturity mismatch and margin risk, and at the same time systematically improve the cost performance and supply chain stability of silver investment through strengthening strategic cooperation with upstream enterprises and other means. (Author's unit: Green Dihua Futures)

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