Silver Faces Short-Term Risks Despite Long-Term Bull Case From Demand & Supply Tightness

In his latest analysis, Alexander Campbell cautions that while silver has delivered extraordinary returns in 2025 (~156% year-to-date), it faces several meaningful short-term pressures that could trigger a correction or at least a temporary malaise in price action [1]. Campbell’s background (formerly global macro at Bridgewater, now leading Black Snow Capital) lends credibility—particularly given he forecasted a structural deficit earlier in the year tied to rising solar demand [1].

The headwinds he cites fall into macro, technical, and industrial categories. On the macro side: tax-motivated selling commonly clusters at year end as investors seek favorable long-term capital gains treatment; expectations of a stronger U.S. dollar following strong U.S. GDP data; and increased margin requirements from CME tightening leverage in paper silver markets [1]. Technically, silver looks “overbought” in many charts, positioning could be skewed, and the futures curve is steeply inverted—spot trading at high premiums over futures in markets like Dubai, Shanghai, and London, which historically points to physical tightness but also warns of speculative dislocation [1].

On industrial risk, substitution narratives (notably copper replacing silver in some solar manufacturing tasks) gain traction when prices run up too far and too fast. Campbell argues that for most solar players, the payback period to switch is currently about 18 months—too long generally to justify at prevailing investment cycles—so while substitution is theoretically possible, it is not an acute threat yet [1].

Societe Generale adds a complementary but slightly divergent view: its bubble model signals suggest silver’s price action resembles past bubble episodes (2010, 2020), but analysts hesitate to conclude a burst imminently, noting that structural shifts—de-dollarization, industrial demand, geopolitical supply constraints—muddy the water and could support elevated price levels [2].

Strategic implications: investors should strongly consider whether recent gains are already priced in or overextended; tactical protection (e.g. hedges, profits‐realization) seems warranted ahead of year’s end. However, the long-term thesis remains intact, with demand from solar, AI infrastructure and structural supply constraints implying higher equilibrium levels over time. Key variables to monitor: changes in U.S. dollar strength, margin rule shifts, China’s export licensing effects, premium spreads between physical and paper, and positioning data among speculators and ETFs.

Open questions include whether margin increases will deepen further, whether the substitution threshold will become operative in more industries, and whether tax season and index rebalancing pressures in early 2026 could catalyze a sharper correction than currently priced.