Silver’s Long-Term Upside amid Near-Term Risks: Tax, Dollar, Policy & Demand

Alexander Campbell’s recent assessment presents a nuanced picture of the silver market as we transition into 2026. After a strong run—silver up over 150% year-to-date, with approximately 30% of that in December alone—Campbell urges caution in the very near term due to a confluence of temporary stress factors. [1] These immediate risks, while significant, appear superimposed on long-term rates of demand and supply that favor further appreciation.

Short-Term Risk Landscape:

• Year-end tax-motivated selling: Large holders may realize gains before December 31 to benefit from specific tax treatments, potentially causing downward pressure in late December and early January. [1]
• U.S. dollar rebound: Strong Q3 GDP data could strengthen the dollar, putting backward pressure on commodities like silver priced in dollars. [1]
• CME margin requirements: The CME raised initial margin requirements for silver futures—from $22,000 to ~$25,000 for the March 2026 contract—triggering forced deleveraging. [2][3]
• Technical overextension: Silver is described as overbought; speculative excess and momentum-driven flows may be vulnerable to sharp reversals. [1]
• Industrial substitution: Copper is mooted as an alternative in certain use cases, especially in solar manufacturing, though that comes with economic and technical drawbacks. [1]

Long-Term Fundamental Drivers:

• China’s export licensing regime, effective Jan. 1, 2026, which will subject most refined silver exports to state oversight. This affects an estimated 60–70% of globally traded refined silver, tightening supply outside China. [2][3]
• Persistent supply deficits: Silver Institute and other analysts point to the fifth consecutive annual deficit in 2025, constrained mine output (often as byproduct), low recycling rates, and inelastic supply response. [3][1]
• Strong industrial demand: Renewable energy (especially solar PVs), EVs, and data center infrastructure are consuming increasing amounts of silver, pushing demand into territory that’s difficult to substitute away from without significant cost or time lag. [1][2]
• Physical silver premiums: Markets in Dubai, Shanghai, and other regions are registering premiums over futures prices, suggesting real tightness in physical delivery. [1][2]

Strategic Implications:

• Investment timing: Given the short-term headwinds, investors might look to defer or hedge purchases until after early January 2026 when tax effects fade and margin pausing may allow consolidation.
• Exposure type: Physical silver or producers/miners may be more attractive than heavily leveraged derivatives, which are more vulnerable to margin hikes and forced liquidations.
• Geopolitical risk monitoring: Licensing changes in China and trade policy/arbitrage opportunities may favor entities that can navigate export rules and anticipate supply constraints.
• Diversification: Given the overbought condition and volatility risk, silver should perhaps be a satellite (not core) holding for near-term portfolios, with attention to gold and industrial metals like copper as complements or hedges.

Open Questions:

• To what extent will China strictly enforce export licensing, how many firms will qualify, and how badly will that choke global supply chains?
• How durable is the current industrial demand growth—especially solar and AI/data centers—if silver prices continue rising sharply?
• What comes next for the U.S. dollar and real interest rates—do they remain favorable to precious metals or swing the other way?
• Could further regulatory or exchange-driven margin/speculation control measures curtail upside or induce volatility beyond what fundamentals suggest?