In March 2025, after experiencing a strong rebound at the beginning of the year, the silver market recently stabilized at a relatively high level. Notably, the TD-SHFE silver structure shifted to a backwardation structure, with rising sentiment for profit-taking among bulls, putting some pressure on silver prices.
Market Structure Changes: Profit-Taking by Bulls
In the domestic market, since March, spot silver prices occasionally inverted against the most-traded SHFE silver contract. Yesterday morning, the TD-SHFE silver structure shifted from contango to backwardation, and the situation did not improve today. In the spot market, TD premiums were almost untradeable, while large suppliers achieved limited transactions at parity. Suppliers quoting parity or slight discounts against the SHFE April silver contract held a slight advantage.
Although silver prices benefited at the beginning of the year from expectations for US Fed interest rate cuts and growing industrial demand, leading to heightened bullish sentiment in 2025, the market traders at that time set overly optimistic expectations. As prices approached key resistance levels and the pricing for a June US Fed interest rate cut was fully absorbed, some investors opted to take profits. LBMA spot silver prices hovered around $32.55/oz, with technical analysis indicating strong resistance near $33. Profit-taking pressure among bulls was evident, and further price increases would require additional momentum or other bullish catalysts.
Industrial Demand and Refined Silver Supply
The anticipated rapid development of sectors such as new energy, PV, and 5G has kept industrial demand for silver at a high level, which remains a key factor supporting silver prices in 2025. The World Silver Institute forecasts a global silver supply-demand gap of 149 million ounces in 2025, driven by high industrial demand growth. The medium and long-term supply-demand imbalance somewhat limits the downside room for silver prices but is unlikely to serve as a significant driver for sharp price increases in the short term.
In Q1, supply growth outpaced demand growth—silver production in February rose by 2.4% MoM and 15.4% YoY. Given the forecast for relatively high silver prices in 2025, some smelters increased their production plans for 2025 and stockpiled related raw materials in advance. Additionally, some lead smelting enterprises undergoing technological transformations and maintenance planned to increase silver-lead production in March. Therefore, silver production is expected to continue rising in March. Downstream operations, which declined in February, gradually recovered in March. However, according to SMM, production order growth was relatively mild. Coupled with reduced restocking enthusiasm due to higher silver prices, spot silver inventories saw a brief accumulation.
March Price Outlook
Overall, silver prices in March 2025 may face some pressure. The pricing of continued US Fed interest rate cuts in 2025 and weak February economic data has already been reflected in Q1 trading. Uncertainty regarding the pace and magnitude of rate cuts will continue to affect precious metal prices.
Although industrial demand and supply deficits provide bottom support for prices, and investors' focus on global economic uncertainty and geopolitical risks sustains silver's safe-haven demand, uncertainties in US Fed policy, short-term profit-taking by bulls, and slowed or slightly increased domestic silver destocking may limit the upside room for silver prices.
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