After the high platform volatility of silver prices at the end of December 2025, the price surged violently in January, continued to fall in March, and stabilized and rebounded at the end of the month. According to the Commodity Market Analysis System of Shengyi Society, the market price of silver on March 31, 2026 was 18373 yuan/kg, a decrease of 20.10% from the spot price of 22994.67 yuan/kg at the beginning of this month (3.1).
In March 2026, the silver market experienced a severe correction, with prices plummeting significantly. The significant drop in silver prices this time was not caused by a single factor, but rather by the resonance of multiple factors such as macro policies, market funds, geopolitical situation, and industrial demand. The specific reasons are analyzed as follows:
1、 Macro policy leadership: The hawkish stance of the Federal Reserve has strengthened, and expectations of interest rate cuts have completely cooled down
Silver has both financial and industrial properties as a precious metal, and its price trend is highly linked to the Federal Reserve’s monetary policy and real interest rate levels. The hawkish policy shift of the Federal Reserve is the core driving factor behind the decline of silver this time. After the March FOMC meeting of the Federal Reserve, Powell and several Fed officials intensively released hawkish signals, clearly stating that the current inflation stickiness has not eased and will maintain high interest rates in the long run. They even mentioned discussing the possibility of interest rate hikes, completely compressing the room for interest rate cuts in 2026. The market’s expectation for interest rate cuts within the year has sharply decreased from three at the beginning of the year to less than one, and the first interest rate cut has also been postponed from June to around December. Due to silver being an interest free asset, the holding cost is positively correlated with the interest rate level. The expectation of high interest rates continues to raise the holding cost, leading to a large amount of speculative funds withdrawing from the silver market and turning to assets with more stable returns such as the US dollar and US bonds, directly laying the main tone for the monthly decline in silver prices.
2、 Pricing suppression: The strong upward trend of the US dollar index further amplifies the downward pressure
As a precious metal priced in US dollars, silver prices usually show a negative correlation with the US dollar index, and the strong rise of the US dollar in March further exacerbated the downward trend of silver. Supported by the hawkish policies of the Federal Reserve, positive economic data from the United States, and the geopolitical conflict in the Middle East driving up energy prices and the demand for safe haven in the US dollar, the US dollar index continued to strengthen in March, breaking through the 105.5 mark at one point and reaching a new high in nearly 10 months. The strengthening of the US dollar not only directly compresses the pricing space of silver, leading to a passive decline in silver prices, but also triggers global capital inflows into US dollar assets, further exacerbating the outflow pressure on the silver market. This is also an important reason why silver fell significantly more than gold in March.
3、 Market capital disturbance: profit taking stacking and high leverage trampling, accelerating price decline
Silver’s annual increase in 2025 is expected to reach 130% -147%, with the highest reaching $117.7 per ounce, accumulating a large amount of short-term profit opportunities; At the same time, the size of the silver market is only 1/10 of that of gold, with a leverage ratio of over 35%, which inherently has high volatility. After the hawkish signal from the Federal Reserve was released in March, early profits were concentrated and liquidated, coupled with high leverage long positions triggering programmed stop loss, forming a phased selling wave. Among them, on March 19th, there was an extreme situation of selling $38 billion within 28 minutes, with a single day drop of 12%, further triggering panic selling in the market and accelerating the decline of silver prices. In addition, the continuous reduction of holdings in the world’s largest silver ETF also confirms the trend of fund withdrawal, further driving down silver prices.
4、 Abnormal geopolitical situation: the support for hedging has failed, and the pressure has intensified in the opposite direction
Since March, the situation in the Middle East has continued to escalate, with the confrontation between the United States and Iran in the Red Sea and Syria intensifying. Shipping in the Strait of Hormuz has been obstructed, pushing international oil prices above $110 per barrel. But unlike the traditional logic of “buying precious metals in troubled times”, this geopolitical conflict did not provide effective support for silver prices, but instead formed an abnormal transmission chain: rising oil prices → strengthening inflation expectations → central bank maintaining high interest rates → silver under pressure. Due to the weaker hedging properties of silver compared to gold, and the dual suppression of inflation stickiness and high interest rate expectations, the hedging buying push brought by geopolitical conflicts is limited, unable to offset the negative pressure at the macro level and prevent the downward trend of silver prices.
5、 Weakened industrial demand: insufficient short-term support, difficult to form effective bottom support
Although in the long run, the global silver supply and demand gap is expected to widen to 130-145 million ounces by 2026, marking the sixth consecutive year of shortage, and industrial demand in areas such as photovoltaics, new energy vehicles, and AI data centers continues to grow, the short-term support for industrial demand in March has shown marginal weakening. Global manufacturing PMI data shows that orders in core industrial silver fields such as photovoltaics and electronics manufacturing have weakened month on month, and the growth rate of photovoltaic installed capacity has briefly slowed down. Coupled with some photovoltaic companies promoting “de silvering” technology, the short-term industrial buying has insufficient support for silver prices. At the same time, market concerns about the global economic recovery falling short of expectations have also cooled down expectations for industrial demand growth, further weakening the industrial attribute support of silver.
Summary and Future Prospects
In summary, the significant drop in silver prices in March 2026 is the result of short-term negative factors such as the hawkish policies of the Federal Reserve, the strong rise of the US dollar, and the stampede of funds, which resonate with the weakening of short-term support for industrial demand. In the short term, if high interest rate expectations and the strong pattern of the US dollar continue, silver prices will still face downward pressure; In the long run, core factors such as the widening global silver supply and demand gap and the growth of industrial demand will still provide bottom support for silver prices. The subsequent trend mainly depends on the pace of the Federal Reserve’s policy shift, the recovery of industrial demand, and the evolution of the geopolitical situation.
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