Silver Faces Short-Term Risks Despite 2025 Surge; Long-Term Fundamentals Stay Strong

In 2025, silver has outperformed almost every major asset class, delivering around 156 % year-to-date returns, with December alone contributing about 30 % of that gain. [1] However, Alexander Campbell now cautions that several temporal risks threaten this rally in the near term. First, he highlights tax considerations: many positions held for over a year face capital gains tax differentials, which could lead to selling pressure around the December 31 deadline. [1] Second, macroeconomic indicators—especially resilient third-quarter US GDP—could revive the US dollar (DXY), which acts as a headwind for commodities like silver priced in dollars. [1] Third, effective December 29, the Chicago Mercantile Exchange raised margin requirements for silver trades, tightening speculative leverage. [1]

Additionally, Campbell points to technical overbought conditions: the sharp run-up in silver may invite profit-taking or a pull-back, especially if market sentiment turns cautious. [1] Industrial substitution risk is another concern. Certain users might begin replacing silver with cheaper metals like copper, particularly if prices remain elevated. Though Campbell estimates solar manufacturers would face about an 18-month payback to make the switch economically viable, that could change with future cost trends. [1]

Yet despite these risks, Campbell’s long-term outlook remains constructive. He argues that physical silver demand—especially from solar and AI/data center infrastructure—is growing inelastic. He also emphasizes widening divergences between physical spot premiums (e.g. Dubai, Shanghai) and futures, and the most extreme backwardation in London over decades. [1] He further flags China’s upcoming export licensing from January 1 as a supply constraint. These factors underlie a structural supply deficit that, in his view, is not yet fully reflected in paper markets. [1]

Comparing his views with other market commentary: the general retreat in silver from peaks above $80 per ounce to mid‐$70s is attributed in other sources to year-end profit taking, margin changes, thin holiday liquidity, and ETF outflows. [2] Reuters confirms spot silver fell to ~$75.32 per ounce on December 29 after earlier highs, largely due to those pressures. [2] These observations align well with Campbell’s headwinds.

Strategic implications are nuanced. Investors with shorter horizons may consider trimming exposure, hedging, or waiting for early-2026 dips. Industrial users need to monitor input cost pressures and substitution economics closely. For those focused on physical silver or ETFs, inventory tightness and premiums suggest paying attention to liquidity and delivery risks. For policy and trade observers, China’s export licensing and US critical minerals designation could influence global supply chains.