Silver Faces "Epic Wash-Out"! Speculative Long Positions "Almost All Withdrawn"

　　Source: China Fund News

　　Reporter: Ye Shijie, China Fund News

　　The precious metals market is undergoing a brutal wave of position liquidation, with silver bearing the brunt. As of October 27, the international spot price of silver was hovering around $53/ounce, down about 56% from the historical high set in January this year. Compared to the roughly 4% drop in gold during the same period, silver has been the hardest hit in this round of precious metals correction. According to data from JPMorgan, managed funds’ net long positions have fallen to their lowest level since the first quarter of 2024, with speculative longs “almost entirely wiped out.”

　　This plunge, which market participants have called an “epic shakeout,” is not the result of a single factor. Structural weakening of industrial demand, forced liquidation of leveraged positions, and ongoing pressure from the US dollar and interest rate environment all resonated within the same window. Goldman Sachs analyst Robert Quinn pinpointed the core issue in his report: “The logic supporting silver’s rise—AI and solar demand—is materializing, but the market remains unmoved because the upward forces of the US dollar and real interest rates are even stronger.”

　　

　　

　　The extreme deviation in technicals confirms the severity of the sell-off.

　　According to LSEG Workspace data, silver is currently trading at about a 25% discount to its 200-day moving average, one of the most extreme technical deviations in recent years. The last similar situation occurred during the global liquidity crisis in March 2020, when silver experienced intense volatility for several months before gradually stabilizing; looking further back, a comparable technical crash was seen in 2013.

　　FxPro’s analysis further warns that Bloomberg Intelligence has suggested silver might repeat the pattern from 1979–1980—when silver prices hit $50, it took decades to recover.

　　Earlier, a Goldman Sachs analysis of CFTC position data showed that in the three weeks leading up to October 13, managed funds cumulatively sold about $2.2 billion worth of silver futures, with reductions in long positions and new shorts occurring simultaneously. The silver market’s size is only about one-tenth that of gold, but its historical volatility is 1.7 times higher, meaning market movements are naturally amplified by the smaller scale.

　　However, position liquidation and a fundamental bottom are two very different concepts. While Quinn acknowledges that extreme short positioning could build momentum for a reversal, he makes it clear this does not constitute evidence of a “sustained trend reversal.” McGlone sets the 10-year mean reversion price at around $31/ounce and points out that after the two surges in 1980 and 2011, it wasn’t until 1993 and 2020, respectively, that silver truly bottomed out.

　　

　　

　　The deeper pressures behind this drop stem from changes in demand structure. The solar industry was once the core driver of silver demand growth in recent years, but this engine is now stalling.

　　JPMorgan forecasts that by 2026, silver demand from the solar industry will decline by about 30%, equating to a reduction of roughly 60 million ounces, and this weakness will continue into 2027. JPMorgan warns plainly that silver faces the risk of shifting from structural shortage to oversupply, and this shift is happening just as speculative positions are being massively cleared out. The dual pressures are severely limiting any rebound potential.

　　Bloomberg Intelligence Senior Commodity Strategist Mike McGlone offers an even blunter assessment. In his report, he writes: “The original scenario of supply shortage could be reversed by this parabolic price adjustment, possibly gradually transitioning into a ‘low prices cure high prices’ phase.” In other words, high prices themselves destroy the shortage logic that supports those high prices.

　　UBS strategist Dominic Schnider notes that incremental demand from data centers, AI infrastructure, and power grid investment is still insufficient to definitively offset the impact of silver savings in the solar sector.

Editor: Zhu Henan