Silver prices experienced a significant correction

According to SunSirs' commodity market analysis system, the silver market price on the afternoon of December 31, 2025, was 17,004 RMB/kg, a decrease of 12.4% compared to the peak spot price of 19,414 RMB/kg this month.

Futures Market: On December 31, 2025, the main Shanghai silver futures contract (AG2602) continued its wide-ranging fluctuations but exhibited an extreme pattern of "rising sharply followed by a unilateral decline." Intraday volatility was predominantly driven by bearish sentiment, as detailed below:

The opening price was 18,508 RMB/kg, and after a brief surge, it reached an intraday high of 18,877 RMB/kg. However, due to a combination of factors including a sharp drop in overseas markets, pre-holiday fund withdrawals, and increased margin requirements, the price declined unilaterally, accelerating its fall in the afternoon, reaching a low of 16,900 RMB/kg. The closing price was 17,103 RMB/kg, a decrease of 1,037 RMB/kg from the previous trading day's settlement price (17,859 RMB/kg), representing a 4.23% drop. The intraday volatility reached 11.21%. The trading volume was 735,900 lots, a significant decrease compared to the 1,442,800 lots on the 29th, and the open interest was 146,800 lots, clearly indicating risk aversion and fund withdrawals.

After repeatedly hitting new highs, silver experienced a significant correction. This was primarily due to a combination of factors: regulatory deleveraging, concentrated profit-taking by investors, a drying up of liquidity during the holiday period, and technical indicators showing the market was overbought. Specifically, the reasons are as follows:

Tighter regulatory policies and pressure on leveraged funds: On December 29th, CME once again raised silver margin requirements by approximately 13.6% (the third increase this year, totaling over 25%), and the Shanghai Futures Exchange also simultaneously raised margin requirements and price limits. High-leverage long positions were forced to liquidate due to margin call pressure, triggering a chain reaction of selling among long positions, and a surge of automated stop-loss orders appeared throughout the day.

Year-end profit-taking by investors: Silver prices have risen by over 180% this year, and institutions and funds were facing year-end settlements and tax-related selling pressure, leading to concentrated profit-taking. As the New Year holiday approached, investors were withdrawing funds due to risk aversion, and the fragile holding structure was triggering a sell-off.

Holiday liquidity crunch amplified volatility: Market liquidity during the Christmas and New Year holidays was approximately 40% lower than on normal days. Market makers were less willing to quote prices, and bid-ask spreads widen. Even a small number of large orders can trigger significant price fluctuations, exacerbating the extent of any market corrections.

Severe overbought conditions and subsequent correction in technical indicators: Silver's RSI had been above 85 for several consecutive days, the gold-to-silver ratio had fallen to a nearly five-year low, and prices had become disconnected from industrial demand in sectors such as solar power and electronics. This led to accumulated technical correction pressure, triggering large-scale stop-loss orders and short covering.

Geopolitical and macroeconomic expectations were showing signs of cooling: rumors of peace talks in the Russia-Ukraine conflict were increasing, leading to a decline in short-term safe-haven demand; at the same time, market expectations for a Fed interest rate cut had already been priced in, and there was a lack of new catalysts to drive prices further upward.

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