Silver Has Plummeted: Should You Buy the Dip?

The silver stocks market has delivered an investment masterclass in volatility early this year. After a spectacular rally that saw the metal skyrocket from roughly $30 per ounce in early 2025 to a historic peak above US$122 in January 2026, silver bullion has hit a proverbial wall. Trading just below the US$70-per-ounce mark at writing, silver has receded into a sharp 40% drop from its recent highs.

This double-digit decline in silver prices raises a critical question for investors: Is this a warning sign of a multi-year bear market, or the ultimate “buy the dip” opportunity for future riches?

Historically, silver spikes were followed by lengthy periods of recovery. However, recent industrial demand growth for silver could still sustain high silver bullion prices or even take the metal back to three-digit prices. You just have to be bullish and patient enough.

Silver in 2026: Why the sudden drop?

A combination of technical, market structure mechanisms, and macroeconomic factors triggered the recent plunge in silver metal prices this year. After the market’s speculative frenzy in January, silver technically hit overbought levels, triggering massive profit-taking. The CME Group raised margin requirements on silver futures contracts on January 28, 2026, forcing speculators to put up more collateral. This triggered a wave of forced liquidations, then leveraged exchange-traded funds (ETFs), and then turned a correction into a full-scale rout.

Externally, a stronger U.S. dollar and shifting expectations for Federal Reserve rate cuts weigh heavily on non-yielding assets like silver bullion. While geopolitical conflicts typically drive investors toward precious metals, the current Iran conflict’s large impact on oil prices strengthens the U.S. dollar and paradoxically dampens silver’s appeal in the short term.

The case for a silver recovery

Despite the recent carnage, the structural bull case for silver remains remarkably intact. Industrial demand for silver is surging to record highs, driven by the green energy transition. This transforms silver from a monetary metal to a high-tech industrial input, with industrial processes gobbling more than 680 million ounces of silver in 2024. Solar panels and electric vehicles’ production growth add to silver’s growing demand, while artificial intelligence (AI) infrastructure compounds it in 2026.

Meanwhile, a supply deficit for silver, which has persisted since 2021, may extend. Mine production remains inelastic in the short term, while silver remains largely a byproduct of other minerals processing. Supply can’t easily meet demand, and investment bankers’ forecasts for a US$150 silver aren’t that far-fetched.

A silver stock in focus: First Majestic Silver

Investors bullish on silver’s recovery and seeking a leveraged exposure to a silver rebound may consider initiating positions in First Majestic Silver (TSX:AG) stock. Unlike most peers, First Majestic is a near “pure-play” silver mining stock that derives about 58% of its revenue directly from silver sales.

First Majestic Silver stock entered 2026 with significant momentum after acquiring the Los Gatos mine in early 2025, which helped boost silver-equivalent production by 75% year over year during the fourth quarter of 2025. Following a 38% drop from its recent peak valuation, the top silver mining stock trades at a forward price-to-earnings (P/E) ratio of 16.7 and a P/E-to-growth (PEG) ratio of 0.4, implying shares are grossly undervalued given the silver miner’s earnings growth potential.

The silver miner recently beat analyst revenue and earnings estimates for the fourth quarter of 2025. It maintains a strong balance sheet, and management targets growing silver-equivalent production ounces significantly in the long term to boost earnings and cash flow.

The silver stock only needs stable to rising silver prices to generate strong capital gains for investors as production grows.

Another way to buy the dip on silver

Beyond buying TSX silver mining stocks, Canadian investors bullish on silver’s recovery may buy silver ETFs like iShares Silver Trust (NYSE:SLV), which offers exposure to day-to-day movements in silver bullion prices. The trust has accumulated a portfolio of nearly 500 million ounces of silver with a net asset value of about US$33.5 billion at writing. Returns for long-term investors have been so good but too volatile lately.

SLV data by YCharts

A $10,000 investment in the silver trust a decade ago could have quadrupled today. The trust pays no distributions and incurs a 0.5% sponsor fee, or about $5 annually on every $1,000 invested.

The post Silver Has Plummeted: Should You Buy the Dip? appeared first on The Motley Fool Canada.

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Fool contributor Brian Paradza has no position in any of the stocks mentioned. The Motley Fool recommends CME Group. The Motley Fool has a disclosure policy.