Silver prices have fallen for three consecutive days and are currently hovering around $75 per ounce, down nearly 7% from their January high. This is related to the adjustment of the weighting of various metals in the Bloomberg Commodity Index, and some investors also believe that the pause in the speculative frenzy is a significant reason for the sharp correction in silver prices.
The CME Group raised margin requirements for precious metals trading again on Thursday, further exacerbating bearish expectations for the metals market. However, some analysts point out that while the CME Group's margin increase aims to curb speculative interest in silver, it's merely a smokescreen to mask a larger problem.
Jen Bawden, founder and CEO of Bawden Capital, stated that the tight supply situation in the physical silver market will only worsen as China begins restricting refined silver exports this year. This policy will affect approximately 70% of the global physical silver supply, fundamentally altering global metal flows. She predicts that silver prices could rise to $200 per ounce.
Working backward from this bullish expectation, she believes that the CME Group's increase in margin requirements may be a carefully planned, desperate bailout of the banking system, aimed at using margin requirements to rescue banking institutions holding large short positions and shield them from the impending physical shortage.
In short, with the increase in margin ratios, investors holding gold and silver positions need to add margin. During the previous upward trend in silver, long positions had substantial unrealized profits, which undoubtedly increased the financial pressure on short investors who were struggling to hold on, and may force them to close their positions or be subject to forced liquidation. This can be interpreted as a passive "self-rescue".
Strongly bullish
Bawden claims to have tracked market cycles for nearly 30 years, successfully predicting the 2000 dot-com bubble and the 2008 financial crisis. She emphasizes that those unfamiliar with the situation might believe the silver price decline was driven by excessive speculation and holiday selling, but they are wrong.
She pointed out that this is different from the Hunt brothers' monopoly collapse in the 1980s. Today, it is no longer a single faction trying to monopolize the market, but different groups competing for supply, such as China, the United States, the European Central Bank, and the solar energy industry.
Bawden stated that silver's recent designation as a strategic mineral by the US and EU will increase industrial demand and transform the competition for remaining silver in London's vaults into a national security issue. Meanwhile, the continued implementation of the Basel III regulatory framework will continue to force precious metals banks to hold more physical silver.
In addition, another important factor driving up silver prices is the Federal Reserve's continued interest rate cuts in 2026. Bawden emphasizes that with interest rates continuing to decline and the dollar index falling below 100, the opportunity cost of holding silver has decreased significantly. When the dollar depreciates again, silver prices will not only rise, but will surge.
Goldman Sachs analysts also noted in a report that even with silver prices at historical highs, investor demand may not be excessive. Holdings in silver ETFs remain below their 2021 peak and could rise further as interest rates cut and investors diversify their portfolios.
