Silver price falls more than half from record high as fund tumbles nearly 70%

Spot silver rose to a record US$121.65 an ounce on January 29 this year before reversing sharply. As at October 20, the London spot silver price stood at about US$57.29, down roughly 53% from the peak and also below its level of about US$70 at the start of the year.

The fall has been even more pronounced for mainland China's silver funds. Guotai Junan UBS Silver Futures LOF — the only on-exchange fund in mainland China that mainly invests in silver futures — is listed on the Shenzhen Stock Exchange under code 161226. Its market price has fallen from a high of 5.247 yuan to 1.707 yuan, a decline of about 67.47%.

Silver 'halving' is nothing new

Silver has risen about 147% over 2025 as a whole, accelerating from December last year. After peaking on January 29, spot silver plunged about 27% in a single day the following day. Around June 24, it fell to around US$60, roughly half its peak. It touched about US$56 in mid-July and stood at about US$59 on October 13.

In other words, silver has spent most of the time since the end of June hovering around half its peak level. The latest move is another retreat this week, rather than the first time it has effectively "halved" in October.

Why the fund fell more than silver

The market price of the Guotai Junan UBS Silver Futures LOF had remained well above its net asset value for an extended period. On December 24 last year, it traded at about 3.116 yuan, while its net asset value was only around 1.85 yuan, putting the premium at one point at 68.19%. The premium was still about 46% on January 27 this year. The fund manager issued several risk warnings and temporarily suspended subscriptions.

As a result, the 67% fall from 5.247 yuan to 1.707 yuan reflects both the decline in silver prices and the narrowing premium. The two figures cannot be directly compared with silver's 53% fall. On February 2, the fund adjusted its valuation benchmark, causing its net asset value to drop 31.5% in a single day — a record daily fall for a publicly offered fund.

For silver futures on the Shanghai Futures Exchange, the most actively traded contract fell from a January high of about 32,382 yuan per tonne to around 13,967 yuan, a decline of approximately 56.9%.

Key drivers: interest rates and the US dollar, with industrial demand a secondary factor

The Federal Reserve kept interest rates unchanged at its June 17 meeting, but signalled that rates could be raised later in the year. In September, the Fed raised rates by a quarter of a percentage point, or 25 basis points, to between 3.75% and 4%. According to CME FedWatch, the probability of a rate increase in October was about 17%, while the probability for December was about 84%.

Rising rate expectations, together with a stronger US dollar, have put pressure on non-yielding precious metals. Analysts said demand had not deteriorated to an extent matching the scale of the decline, suggesting that position adjustments were a more significant factor.

Industrial demand has weakened. The Silver Institute forecasts that industrial demand will fall about 3% year on year in 2026. However, the same forecast shows that global silver supply will remain in a deficit of about 46.3 million ounces, marking the sixth consecutive year of a shortfall.

The gold-silver ratio briefly fell below 50 on January 26 before rising to about 70 in July. But gold also fell — it stood at about US$4,000 in mid-July, nearly 30% below its January peak of about US$5,600 — and did not buck the trend.

Outlook: US$50 is support, but could also be just a stopping point

McGlone, senior commodity strategist at Bloomberg Intelligence, said in a report published in early October that silver could remain in a US$50 to US$84 range over the next several years. He described around US$50 as the first significant support level, adding that silver would need to regain and hold above US$84 to signal a strengthening trend.

According to Chinese-language media reports, he also said the 10-year average silver price was about US$31. He noted that after reaching a high in 1980, silver fell to US$3.60 in 1993, while after reaching a high in 2011, it fell to US$11.60 in 2020.

Historically, silver's 1980 peak of about US$50 was not surpassed until 2025. After approaching US$50 again in 2011, it likewise took more than a decade to reach a new high. Adjusted for inflation, this January's peak still did not exceed the real high recorded in 1980.

What to watch

• The Fed's October 27-28 policy meeting, and whether expectations of a rate increase in December will ease.
• Actual production schedules and demand data from industries such as solar photovoltaics, and whether they support forecasts of weaker industrial demand.
• The pace at which the gold-silver ratio retreats. If the ratio remains elevated, it will be harder for silver to strengthen independently.