Things have turned around all of a sudden for the devil’s metal, as silver is called for its absurd and volatile price swings. The price has tumbled over 50 per cent from its record high of $121 per ounce. Silver (spot price) is currently trading at $58 per ounce.

It began the year with a bang by surging 70 per cent and recording a high of $121 per ounce in January. This is the first time in history that the poor man’s gold has risen above the psychological $100-mark. Prior to this rise, the price had skyrocketed 148 per cent in 2025, the highest for any year since 1979. Robust inflows into the silver-backed Exchange Traded Products (ETPs), traders building up huge long positions and strong retail demand were the major factors that drove the price higher.

The big question now is where the silver price is headed. From a pure technical point of view, a comparative study with the Shanghai Composite index shows that silver can run into a prolonged sideways move, going forward. Before getting into these details, let us first see what caused the sudden fall in silver price and some other factors that are likely to impact the price movement.

The trigger

The Chicago Mercantile Exchange increasing the initial and maintenance margin for trading in silver on January 30, 2026, triggered the sudden price reversal.

The initial margin was increased from 11 per cent/12.1 per cent to 15 per cent/16.5 per cent. The maintenance margin, on the other hand, was increased to 15 per cent from 11 per cent. Following this announcement, silver price crashed over 35 per cent on a single day on January 30 from a high of around $118 to a low of $74, as traders rushed to book profits and exit their trades.

Demand-supply scenario

According to the Metal Focus World Silver Survey 2026 released by The Silver Institute, a deficit in silver is likely for the sixth consecutive year. It is estimated that there will be a deficit of 46 million ounces for this year. This deficit will be about six million ounce higher than the one seen in 2025.

The supply/demand scenario can remain uncertain due to the ongoing geopolitical tensions. So, this may not have a major say on the price movement, going forward.

But, we see the US dollar could be one of the major factors driving the silver price either way, this year.

Dollar impact

A close study on the price movement since the beginning of this year shows that the silver price has been largely driven by the dollar (see the chart). The dollar index has strengthened from a low of 95.5 in January to 101.45 now.

A surge in oil price on the back of the on-going US-Iran war has pushed the US yields higher. That, in turn, is supporting the dollar strength. The US Federal Reserve has kept the room for one rate hike this year. This can support the dollar to remain strong. As long as the dollar index stays above 100, it has the potential to see 103 initially and even 105-106 eventually in the coming months.

So, the upside in the silver price can be capped on the back of the strong dollar.

Gold/silver ratio

The surge in silver price to $120 in January dragged the gold/silver ratio to a low of about 43.5. This was the first time in the last 15 years that the ratio had declined below 50. Prior to this fall, the average value of this ratio had been around 80 since 2015. Barring the dip to 30 in 2011 and the rise to 127 in 2020, the ratio has been moving inside a wide range of 40-100 since 1984.

The ratio has now come up to 69. Based on technical analysis, it can rise to 76-78 in the coming months. Gold ($4,052 per ounce) has room for a fall to $3,800-$3,750. The upside can be capped at $4,300 from here.

For a range of $3,750-4,300 in gold and 66-78 in the gold/silver ratio, we get an average price of $56 for silver. This suggests that silver price can remain subdued.

The Chinese connection

An observation in the price movement shows that the recent movement in silver is similar to that of the earlier movement in the Shanghai Composite index. The movement in silver price since April 2024, is similar to that of Shanghai Composite since July 2013 (see graph). If the same trend sustains, then it suggests that the upside in silver can be capped at $70.

Historical movement shows that the Shanghai Composite index ran into a multi-year sideways consolidation from 2016 to 2024. This suggests that silver can also remain stuck in a wide range of $40-70, going forward.

Published on July 25, 2026