NextFin News - Spot silver fell 3.7% to trade near $72.13 an ounce on Thursday, May 28, 2026, while front-month U.S. silver futures dropped by an identical margin to settle at $72.16. This latest slide extends a volatile correction that has gripped the precious metal since its historic peak earlier this year, as major financial institutions warn that high prices have severely damaged industrial demand.
The metal's breakneck rally of more than 140% in 2025 has turned into a double-edged sword. While the surge rewarded early investors, it has increasingly deterred industrial buyers who rely on silver as a critical component in electronics, solar panels, and automotive manufacturing. In a research note published on May 22, UBS analysts warned that this demand erosion is likely to persist as long as prices remain near current levels, making a sustained recovery difficult to achieve.
Unlike gold, which benefits from consistent purchasing by central banks, silver lacks a strategic sovereign anchor. UBS analysts pointed out that silver remains entirely absent from official sector reserves, leaving its price highly vulnerable to the whims of private investment and cyclical industrial demand. Consequently, the Swiss bank currently views silver as an unappealing asset, arguing that its extreme volatility does not offer investors an attractive risk-reward profile.
The current downturn marks a dramatic reversal from the speculative frenzy seen on January 28, 2026, when silver spiked to a record high of $120 an ounce before plunging nearly 30% in a single session. After bottoming out at a yearly low of $67.60 on March 20, prices staged a brief recovery to $87 on May 14, only to lose momentum and spend the past two weeks consolidating between $75 and $78.
Analysts at HSBC have also adopted a cautious stance, recently stating that the metal remains fundamentally overvalued. The bank's analysts suggest that the premium built into silver during recent geopolitical tensions, including the conflict in Iran, is rapidly evaporating as broader macroeconomic headwinds take center stage.
However, this bearish outlook is not universally shared across the market. Some commodity strategists argue that the structural demand from the global green energy transition will provide a firm floor for prices. Silver is a vital element in the production of photovoltaic solar cells and electric vehicles, sectors that continue to expand despite short-term economic fluctuations. Proponents of this view believe that any prolonged dip below $70 will quickly entice industrial buyers back into the market to replenish depleted inventories.
For now, the immediate pressure remains on the downside. Industrial manufacturers are actively exploring thrifting—reducing the amount of silver used in components—or substituting the metal with cheaper alternatives like copper. This shift in manufacturing behavior suggests that the demand destruction warned of by UBS and HSBC may have lasting consequences for the metal's price ceiling.
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