Changes in Silver Market Structure: Will Prices Be Under Pressure in March? [SMM Analysis]

March 2025 Silver Market Analysis: Stabilized at High Levels but Facing Resistance

In March 2025, after a strong rebound at the beginning of the year, silver prices recently stabilized at high levels. However, changes in market structure and fluctuations in investor sentiment have exerted some downward pressure on silver prices.

Market Structure Changes: Profit-Taking by Bulls
Since March, domestic spot silver prices have occasionally inverted against the most-traded SHFE silver contract. Yesterday morning, the TD-SHFE silver structure shifted from contango (futures premium) to backwardation (spot premium), and this situation has not improved today. In the spot market, TD premiums were almost untradeable, while large suppliers achieved limited transactions at parity. Suppliers slightly favored quoting at parity or small discounts against the SHFE April silver contract.

Although silver prices at the beginning of the year benefited from expectations for US Fed interest rate cuts and growing industrial demand, market sentiment for silver in 2025 was highly bullish. However, as prices approached a key resistance level (around $33/oz), coupled with the fact that expectations for a US Fed interest rate cut in June had been fully priced in, some investors opted to take profits. LBMA spot silver prices hovered around $32.55/oz, with technical analysis indicating strong resistance near $33. Further price increases would require additional momentum or bullish factors.

Industrial Demand and Refined Silver Supply
The rapid development expected in sectors such as new energy, PV, and 5G has kept industrial demand for silver at high levels, providing strong support for silver prices in 2025. The World Silver Institute forecasts a global silver market supply-demand gap of 149 million ounces in 2025, based on the backdrop of high industrial demand growth. The medium and long-term supply-demand imbalance limits the downside room for silver prices, but it is unlikely to drive significant price increases in the short term.

On the supply side, Q1 silver production growth outpaced demand. In February, silver production rose 2.4% MoM and 15.4% YoY. As the market expects silver prices to remain high in 2025, some smelters have increased production plans and stockpiled raw materials in advance. Additionally, some lead smelters, driven by technological transformation and maintenance needs, plan to increase silver-lead production in March, with silver output expected to continue growing. However, downstream demand growth remains mild, and as silver prices rise, enterprises' restocking enthusiasm has declined, leading to a temporary inventory build-up in the spot silver market.

March Price Outlook
Overall, silver prices in March 2025 may face some resistance. Expectations for continued US Fed interest rate cuts in 2025 and weak February economic data have already been priced into Q1 trading. Uncertainty surrounding the pace and magnitude of rate cuts will continue to affect precious metal prices.

Although industrial demand and supply deficits provide bottom-line support for silver prices, and investors remain highly attentive to global economic uncertainties and geopolitical risks, sustaining silver's safe-haven demand, factors such as uncertainty in US Fed policy, short-term profit-taking by bulls, and a slowdown or slight increase in domestic silver destocking may limit the upside room for silver prices.