Silver markets experienced a dramatic reversal on December 29, 2025, as prices crashed by an astonishing Rs 21,000 per kilogram in a single day, following what had been a historic rally. The sudden plunge, which saw spot silver tumble from an all-time high of $83.62 per ounce to the mid-$70s, left investors reeling and analysts searching for answers. According to The Economic Times and Reuters, the collapse was triggered by a confluence of geopolitical developments, technical indicators, and market dynamics that exposed the fragility of silver’s recent meteoric ascent.
Until this abrupt downturn, silver had been the standout performer of 2025, boasting a staggering 181% year-to-date gain—far outpacing gold’s 72% rise, as reported by Reuters. This surge was fueled by a cocktail of factors: supply shortages, robust industrial and investment demand, and the U.S. government’s designation of silver as a critical mineral. Investors, lured by the metal’s momentum, poured into exchange-traded products like the iShares Silver Trust (SLV) and Sprott Physical Silver Trust (PSLV), which allow trading of silver exposure without the hassle of storing physical bars or coins.
But the rally’s sheer velocity left the market vulnerable to sharp swings. The first major warning sign came on Friday, December 26, when silver prices spiked over 10% in a single day—one of the largest one-day gains on record. According to BTIG’s Jonathan Krinsky, "the last time it gained 10% in a multi-month high was in 1987. It marked the peak and fell 25% over the next few weeks." In fact, SLV closed at $71.12 that Friday, up about 9%, while PSLV ended at $26.04, up 8.7%, Investing.com data showed. Such moves, reminiscent of past speculative peaks, set the stage for a classic blowoff top.
By Monday morning, the mood had shifted dramatically. As Reuters reported, spot silver was down 4.8% at $75.32 per ounce by 5:17 a.m. ET, with U.S.-listed silver funds SLV and PSLV declining 4.6% and 4% respectively in premarket trading. Another major ETF, the abrdn Physical Silver Shares ETF (SIVR), was indicated down 3.9%. The reversal came as investors rushed to book profits and reassessed risks in light of new geopolitical signals.
The immediate catalyst for the selloff was progress in peace talks between U.S. President Donald Trump and Ukrainian President Volodymyr Zelensky. Trump declared on Sunday that he and Zelensky were "getting a lot closer, maybe very close" to a potential agreement to end the war in Ukraine, as cited by The Economic Times. This hint of easing geopolitical tensions slashed safe-haven demand for precious metals, prompting a wave of profit-taking across the bullion complex.
Technical factors also played a decisive role in accelerating the downturn. The rally had become "parabolic," according to ICICI Prudential Mutual Fund, with the monthly Relative Strength Index (RSI) hitting 91—levels only surpassed during the infamous Hunt Brothers squeeze of the 1980s. "History suggests that such spectacular rises in silver rarely end gently," the fund warned. In previous cycles, including the 1979-80 and 2011 peaks, silver prices collapsed by more than 75% after comparable surges. As Krinsky observed, "past cycles suggest that once momentum breaks, silver can fall sharply—often by 50% or more."
Adding to the selling pressure, the Chicago Mercantile Exchange (CME) hiked the initial margin requirement for the March 2026 silver futures contract from $20,000 to $25,000, effective immediately. This forced traders to post more collateral, triggering further liquidations as some investors were unable or unwilling to meet the new requirements. As The Economic Times explained, "the move forces traders to post more collateral, triggering additional liquidation."
Meanwhile, the broader market environment shifted as well. Justin Khoo, Senior Market Analyst at VT Markets, noted that "this selling pressure was compounded by a slight uptick in the US dollar and yields, reducing the appeal of non-yielding commodities." Improved risk appetite in equities and funds rotating out of commodities exacerbated the exit from silver, especially with traders squaring positions ahead of year-end.
All eyes now turn to the Federal Reserve, with markets eagerly anticipating the release of the December meeting minutes on December 30, 2025. As Reuters pointed out, "investors are watching the Federal Reserve's December meeting minutes ... for clues on the 2026 interest rate path, which affects silver prices." Precious metals typically benefit when yields fall, as they do not pay interest, so any hint of rate cuts could quickly alter the narrative once again.
Despite the carnage, some analysts remain cautiously optimistic. Jigar Trivedi, Senior Research Analyst at Reliance Securities, maintains that "overall the trend is positive yet volatile" with Rs 2.4 lakh as near-term support for silver. However, Krinsky suspects "a pullback to the 50 DMA ($55.40) is highly likely in the coming 1-2 months. That would represent a -25-30% pullback depending on the timing."
The role of silver-linked ETFs in the recent volatility cannot be overstated. SLV, managed by BlackRock, holds around 529 million ounces of silver worth about $39 billion at current prices, according to Reuters. PSLV, structured as a closed-end trust, allows unitholders to redeem for physical metal, though it can trade at a premium or discount to net asset value. The sharp inflows and outflows in these vehicles have amplified price swings, as demand for exposure to silver surged and then evaporated almost overnight.
Looking back, the late-year, near-vertical surge in silver “raises the risk of higher volatility,” according to Charu Chanana, chief investment strategist at Saxo, as quoted by Reuters. The extraordinary rally was driven by a perfect storm: supply constraints, low inventories, and surging industrial demand, all against a backdrop of heightened geopolitical uncertainty. Yet, as the events of December 29 proved, such rallies can be as fleeting as they are spectacular.
For now, silver’s rollercoaster ride has hit the pause button. Whether this is simply a healthy correction or the beginning of a much deeper retreat remains to be seen. What’s clear is that the silver market, always known for its volatility, has once again lived up to its reputation—reminding investors that in commodities, fortunes can turn in the blink of an eye.
