Silver will see more volatility, but the market is not in a bubble - Société Générale

• China's export restrictions starting January 1 could reduce global refined silver supply by up to 30%, exacerbating existing deficits of 200-230 million ounces against 1.24 billion ounces of demand
• Silver's price action viewed on a logarithmic scale shows a stable 25-year compounding trend rather than a bubble pattern, with volatility amplified by market illiquidity
• Physical premiums are rising across key markets including China, London, and India due to geographical shortages of 1,000-ounce bars

Silver Market Analysis: Société Générale Dismisses Bubble Concerns Despite Volatility

Silver prices experienced significant turbulence after reaching an all-time high of $84/oz, plummeting 9% on Monday before finding support above $72/oz. Despite this volatility, the precious metal remains up 160% for 2025.

Société Générale analysts argue the silver market is not in a bubble, despite some models suggesting otherwise. They emphasize that viewing price action on a logarithmic scale reveals a stable 25-year compounding trend rather than an unsustainable spike. The bank attributes bubble-like signals to silver's inherently smaller, more volatile market structure where illiquidity amplifies price instability.

Key Fundamental Drivers:

• Global de-dollarization trend supporting demand
• Elevated market uncertainty
• China's export restrictions starting January 1, 2025

Supply Concerns:

China, which supplies 60-70% of global refined silver, is implementing export restrictions that could reduce shipments by up to 30%. With global deficits running 200-230 million ounces and demand exceeding 1.24 billion ounces in 2025, these restrictions will likely deepen shortages.

Market Outlook:

SocGen expects continued liquidity issues but doesn't anticipate U.S. tariffs on silver imports despite the metal's new critical designation. The Section 232 analysis results are expected mid-January. Geographic shortages of 1,000-ounce bars are already evident in China, London, and India, creating physical premiums across key markets.

The analysts interpret current volatility as instability indicators rather than trend reversal signals, expecting healthy corrections within the broader upward momentum supported by strong fundamentals.