China’s role proved decisive
China’s role in the surge – and subsequent pullback – was decisive. Four of the ten most-read stories on Chinese financial news sites on Monday focused on silver, highlighting the intensity of domestic interest.
Trading in China’s only pure-play silver ETF, the UBS Guotou Silver Investing LOF, had been halted on Friday due to extreme volatility after its market price soared more than 60% above its net asset value. When trading resumed, that premium remained elevated at around 34%.
Shanghai silver bullion nonetheless set a new local auction record, rising to over ¥19,400.00 per kilogram, even as gold prices in Chinese yuan terms slipped to their lowest level in a week. The combination of strong domestic demand and a weak dollar pushed Shanghai silver to more than $86.00 per ounce on a dollar-equivalent basis – over $8.00 above London prices at the time of China’s PM benchmark.
Limited physical tightness evident
Market plumbing did little to justify the magnitude of the rally. Bullion borrowing costs in London were largely unchanged from the prior week. Gold lease rates hovered near 1.3% annualised, while silver lending rates remained elevated but didn’t signal acute shortage. Platinum and palladium lease rates also remained high, reflecting localised tightness rather than systemic stress.
Other precious metals mirrored silver’s boom-and-bust pattern. Platinum briefly traded close to $2,500.00 per ounce before falling back toward $2,125.00, while palladium touched near-three-year highs close to $2,000.00 before dropping sharply back to mid-December levels.
Long-term fundamentals remain intact
The solar energy narrative, while real, has become increasingly nuanced. Since 2021, rapid growth in global photovoltaic installations has made solar one of the most important sources of incremental silver demand.
According to Metals Focus, 2025 marked a turning point with total silver consumption declining despite record installations as rising prices incentivise aggressive thrift and substitution by manufacturers.
Metals Focus still expects global silver supply to fall short of demand in 2026 for the sixth consecutive year, but the projected deficit is the smallest since 2021. This weakens the argument that current fundamentals justify parabolic price action.
Meanwhile, previously bullish assumptions – such as endlessly rising PV silver intensity and Beijing’s November decision to introduce silver export licenses from January 2026 – became catalysts for speculative frenzy rather than reflections of immediate supply disruption.
The sharp reversal was less a repudiation of long-term themes and more a textbook speculative blow-off.
De-dollarisation trends, structural silver deficits, and industrial demand remain relevant over multi-year horizons. But in the short term, holiday-thinned liquidity, social-media-driven speculation, and aggressive retail participation pushed prices far beyond sustainable levels.
Trading considerations post-correction
For investors navigating precious metals volatility:
- Research fundamental drivers versus speculative positioning.
- Consider thin liquidity risks during holiday periods.
- Open an account on the IG website.
- Access commodities through the platform.
- Implement strict risk management.
Spread betting and CFD trading offer approaches.
In short, Monday’s sell-off marked return to reality.