"The price has never been this bad", silver has suffered an epic washout.

Silver is experiencing its most brutal technical collapse since the pandemic, but the oversold technical condition is not enough to offset the continuous deterioration of fundamentals.

Silver is currently trading at a discount of as high as 25% to its 200-day moving average, marking the largest deviation since the pandemic liquidity crisis in March 2020. At the same time, speculative long positions have almost been liquidated, and the continued strengthening of the US dollar has further suppressed metal prices. According to JPMorgan Chase data, the net long position of managed money has fallen to the lowest level since the first quarter of 2024.

What worries the market even more is that this round of sell-off is not a simple position liquidation. Photovoltaic demand, one of the most important structural growth drivers for silver, is expected to drop by about 30% this year, equivalent to roughly 60 million ounces, and the weak trend will continue into 2027. This means the silver market may be shifting from a long-term structural shortage to oversupply.

Technical Aspect: Extreme Deviation at the Level of Liquidity Crisis

Silver is currently at a 25% discount to its 200-day moving average, one of the most extreme technical misalignments in recent years. According to LSEG Workspace data, the last time a deviation of a similar magnitude occurred was during the global liquidity crisis triggered by the pandemic in March 2020; if we extend the timeline further, the comparable technical collapse before that dates back to 2013.

The core problem facing the market now is: Is this a exhausted panic sell-off, or is the market repricing for a long-term prospect with weaker fundamentals? The oversold signal itself cannot give the answer — as seasoned market participants are well aware, an oversold condition can last far longer than most traders expect.

Positioning Aspect: Long Positions Have Almost Disappeared

The reset at the position level is equally staggering. According to JPMorgan Chase, the net long position of managed money has dropped to the lowest point since the first quarter of 2024, with speculative long positions almost fully retreating.

However, position liquidation and fundamental bottoming out are two completely different concepts. The extremely light positioning means that short covering may bring a temporary rebound, but if fundamentals continue to deteriorate, any technical rebound will hardly form a trend-based recovery.

Fundamental Aspect: Plunging Photovoltaic Demand Creates Structural Pressure

The underlying logic behind this round of silver's decline lies in the substantial shift in fundamentals. Photovoltaic panel manufacturing is the core driving force for silver demand growth in recent years, but according to JPMorgan Chase's forecast, this demand is expected to drop by about 30% this year, equivalent to a demand gap of roughly 60 million ounces, and the weakness will continue into 2027.

This is a major shock for a market that has long been accustomed to structural supply shortages. JPMorgan Chase warns that the silver market faces the risk of shifting from structural shortage to oversupply, and this shift occurs exactly at the time when speculative positions are being massively liquidated. The superposition of dual pressures has severely suppressed the upside room for a rebound.

US Dollar Pressure: Simple But Fatal

The negative correlation between the strengthening of the US dollar and the weakening of silver has run through the main line of market movements throughout this year. The strong US dollar continues to suppress silver prices by raising the holding cost of US dollar-denominated commodities, and this logic does not need to be overcomplicated.

As long as the strong pattern of the US dollar is not reversed, the macro pressure faced by silver can hardly be fundamentally alleviated.

Long-term Technical Levels: Key Support Lies Even Lower

From a longer-term perspective, silver is currently testing the 100-week moving average. However, the more critical long-term trend line is located in the much lower area of around $48, which will be the core support closely watched by technical analysts and long-term investors.

If fundamentals continue to deteriorate and technical support fails to hold effectively, the risk of silver moving towards this long-term trend line cannot be ignored. The current extreme oversold state may spawn a short-term rebound, but before the triple pressures of falling photovoltaic demand, a stronger US dollar and position reset have not dissipated, the structural predicament of silver will continue.

This article does not constitute personal investment advice, does not represent the views of the platform. The market is risky, investment requires prudence, please make independent judgments and decisions.

This article is from the WeChat Official Account "Wall Street CN", author: Bu Shuqing, published with authorization from 36Kr.