Silver Crashes 8.7% After Record $84 High as CME Hikes Margins, China Restricts Exports

December 30, 2025 · by Fintool Agent

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Silver futures suffered their worst single-day collapse since February 2021 on Monday, plunging 8.7% after the CME Group raised margin requirements on the precious metal amid record-breaking volatility. The iShares Silver Trust (SLV-6.61%) cratered 7.2% to $66.01 after touching $83.62 earlier in the session, capping a wild swing that saw silver briefly break above $80 per ounce for the first time in history. 1

The catalyst: CME Group's announcement Friday that it would boost margin requirements for silver futures to approximately $25,000 per contract—a $5,000 increase from earlier this month—forcing leveraged traders to either add capital or liquidate positions. 2

"This morning's price decline, which follows record highs, is attributable mainly to traders taking profits ahead of the year-end," said ActivTrades analyst Ricardo Evangelista. 3

The Numbers

Silver's 2025 rally from $29 to north of $80 per ounce represents the metal's best year since 1979, when prices spiked during the Hunt brothers' infamous attempt to corner the market. 4

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China's Export Crackdown

The broader catalyst behind silver's parabolic run is geopolitical: China will implement new export restrictions on silver starting January 1, 2026, requiring government licenses for companies to ship the metal abroad. Only large, state-approved firms will qualify—those with at least 80 tonnes of annual production and approximately $30 million in credit lines. 1

The policy effectively blocks hundreds of smaller and mid-sized exporters who have long served as key suppliers to global industrial users. China controls an estimated 60–70% of the world's refined silver supply. 2

Tesla-1.04% CEO Elon Musk weighed in over the weekend, warning on X: "This is not good. Silver is needed in many industrial processes." 3

The move mirrors China's earlier strategy with rare earth metals, where export controls were used to secure domestic industrial advantage and global pricing power.

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Mining Stocks Hammered

Silver miners bore the brunt of Monday's selloff, though all remain dramatically higher for the year:

The aftermarket showed tentative recovery, with PAAS rebounding to $54.31 and AG to $17.28 in extended trading.

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Industrial Implications

Silver's role as an industrial metal makes its price volatility far more consequential than gold. Key applications include:

Solar Panels: Silver paste forms the conductive layer in photovoltaic cells, with solar manufacturing accounting for approximately 20% of global silver consumption. Analysts warn that prices near $134 per ounce would wipe out operating profits across the solar industry. 1

Electric Vehicles: Silver is used extensively in EV wiring, electronics, and battery contacts. Tesla alone consumed an estimated 3 million ounces of silver in 2025.

Data Centers/AI: Thermal paste, circuit boards, and electrical contacts in server farms increasingly rely on silver's superior conductivity.

Electronics & Medical Devices: From smartphones to surgical equipment, silver's antimicrobial properties and conductivity make it irreplaceable in numerous applications.

First Solar-1.16%, which uses cadmium telluride instead of silver-based technology, fell just 0.5% on Monday—a relative safe haven as investors recalculated exposure to silver-dependent solar peers.

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Historical Parallels: 1980 and 2011

Monday's CME margin hike revives memories of two prior silver peaks:

1980: The Hunt brothers accumulated over 200 million ounces of silver, leveraging futures to push prices near $50. CME's introduction of "Silver Rule 7," which effectively eliminated leverage, combined with Paul Volcker's rate hikes, crushed the rally and bankrupted the Hunts. 1

2011: Silver surged from $8.50 to $50 amid zero interest rates, quantitative easing, and the European debt crisis. CME raised margins five times in nine days as prices peaked, forcing leveraged funds to liquidate and sending silver tumbling 30% in weeks.

"Silver tends to be a product that goes parabolic, then collapses," Brent Donnelly, president of market research firm Spectra Markets, told the Wall Street Journal. 2

The current intervention is less aggressive than 1980 or 2011, but the pattern is recognizable: rapid margin increases drain leverage and compel traders to commit more capital or exit positions.

The Structural Deficit

Beyond speculation, silver faces genuine supply constraints. For the past five consecutive years, global demand has exceeded total supply:

• 2025 Demand: ~1.24 billion ounces
• 2025 Supply (mine + recycling): ~1.01 billion ounces
• Annual Deficit: ~230 million ounces 3

Unlike gold, silver mining is largely a byproduct of copper, zinc, and lead production. Even if silver prices double, miners cannot easily increase supply because their operations are driven by base-metal economics. New mining projects take 8–12 years to develop, and ore grades are declining globally.

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What to Watch

January 1, 2026: China's new export licensing regime takes effect, potentially removing a significant share of global tradable silver from the market.

COMEX Inventories: Watch for further drawdowns in registered silver stocks. Physical scarcity in Asia has already created backwardation on the Shanghai Gold Exchange, with spot silver trading above futures.

Margin Requirements: Additional CME hikes could trigger further deleveraging. The exchange raised margins twice in December alone.

Industrial Demand: Solar installations, EV production, and data center buildouts show no signs of slowing, underpinning structural demand.

U.S. Tariff Review: The Commerce Department is investigating whether imports of critical minerals pose a national security risk, potentially paving the way for tariffs on silver. 1

"The big picture for precious metals still looks structurally supportive with easier rates ahead, persistent fiscal and geopolitical unease, and ongoing diversification demand," said Charu Chanana, chief investment strategist at Saxo Bank. "Any pullbacks may be seen as opportunities for long-term investors to rebuild exposure." 2

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Related Companies: Ishares Silver Trust-6.61% · SPDR Gold Shares-0.65% · Pan American Silver-1.67% · First Majestic Silver-1.59% · Hecla Mining-1.51% · Coeur Mining-1.44% · First Solar-1.16% · Enphase Energy-0.43% · Tesla-1.04%