Silver's historic 2025 rally encountered its first major bout of profit-taking on December 29. After touching a record $82.61 per troy ounce in early trading, the white metal plunged more than 6% to $74.24, marking one of the sharpest single-day declines of the year. Gold also retreated, falling 3.5% from near $4,550 to $4,374. The pullback comes as investors lock in gains from an extraordinary year for precious metals.

Monday's Volatile Session

The precious metals complex saw dramatic swings:

  • Silver high: $82.61 (new record)
  • Silver close: $74.24 (-6.16%)
  • Gold high: Near $4,550
  • Gold close: $4,374 (-3.47%)
  • Volatility: Highest single-day swings since October squeeze

2025 Performance Despite Pullback

Even after Monday's decline, the annual gains remain extraordinary:

  • Silver: Up approximately 166% YTD (best since 1979)
  • Gold: Up approximately 70% YTD (best since 1979)
  • Context: Both metals outperformed the S&P 500's 18% gain by wide margins

What Triggered the Selloff

Several factors converged to spark profit-taking:

Year-end positioning: Institutional investors and hedge funds are closing books for 2025, locking in gains to report to clients.

Technical exhaustion: Silver's parabolic move from $30 to $82 left the metal extremely overbought on multiple technical indicators.

Thin liquidity: Holiday trading volumes amplified the move, with fewer buyers to absorb selling pressure.

Dollar bounce: A modest strengthening in the U.S. dollar added headwinds for precious metals.

The Supply Story Remains Intact

Despite the pullback, the fundamental drivers of the silver rally haven't changed:

Structural deficit: The Silver Institute estimates a 95+ million ounce supply shortfall in 2025—the fifth consecutive year of deficits.

Industrial demand: Solar panel manufacturing, electric vehicles, and electronics continue consuming record amounts of silver.

Mining constraints: New production takes 7-10 years to develop; supply cannot quickly respond to higher prices.

Critical mineral status: The U.S. designation of silver as a critical mineral supports domestic stockpiling efforts.

China Export Restrictions Loom

A major catalyst awaits in January 2026:

  • China's share: Controls an estimated 60-70% of global silver supply
  • New policy: Export restrictions taking effect January 2026
  • Potential impact: Further supply squeeze in an already tight market
  • Analyst view: Could drive prices higher despite today's pullback

Gold's Parallel Retreat

Gold's 3.5% decline shares similar dynamics:

  • Profit-taking: After 70% annual gains, some realization was inevitable
  • Central bank buying: Remains supportive at ~1,000 tonnes annually
  • Rate cut expectations: Fed projected to cut 1-2 times in 2026
  • Analyst targets: Goldman at $4,900, Bank of America sees $5,000 possible

Historical Context

Sharp pullbacks during bull markets are normal:

  • 1979-1980: Silver saw multiple 10%+ corrections during its run from $6 to $50
  • 2011: Silver dropped 30% in a week during its rally to $50
  • 2025: Today's 6% decline is modest by historical standards

Bull markets don't move in straight lines. Corrections shake out weak hands and allow new buyers to enter at better prices.

Technical Outlook

Key levels to watch after the pullback:

  • Silver support: $70-72 (prior resistance becomes support)
  • Silver resistance: $82.61 (new record high)
  • Gold support: $4,200-4,300
  • Gold resistance: $4,550 (recent high)

What Investors Should Do

For precious metals investors:

Don't panic: A 6% pullback after 166% gains is healthy, not alarming.

Consider adding: Those who missed the rally may find current prices more attractive.

Size appropriately: Precious metals should be a portfolio allocation (5-15%), not an all-in bet.

Watch China: January export restrictions could be the next major catalyst.

The Bottom Line

Silver's 6% plunge from record highs and gold's 3.5% retreat represent normal profit-taking after extraordinary annual gains. The fundamental story—supply deficits, industrial demand, China export restrictions, central bank buying—remains intact. For long-term investors, the pullback may present a buying opportunity rather than a warning sign. The precious metals bull market of 2025 isn't over; it's simply pausing to catch its breath before what could be an even more eventful 2026.