Factors In Favor of Profit-Taking (Price Downside)

[tradelikepro]

Year-End Closing: Investment funds and traders lock in gains to report strong performance to clients and secure year-end bonuses. With the asset up over 100%+ year-to-date, the desire to "take money off the table" is a natural process.

Technical Overbought Conditions: The RSI (Relative Strength Index) for silver is currently in overbought territory as of late December. This often signals a need for a technical correction toward the $62–$64 levels.

Tax-Loss Harvesting & Rebalancing: While investors in the U.S. typically sell underperforming assets for tax benefits, in the case of silver (which is significantly up), they may sell portions of their positions for portfolio rebalancing to maintain their target asset allocation.

Overall Probability of Profit-Taking: 70–75%

I break this forecast into two stages, as the underlying logic for each differs significantly:
Phase 1: Through the end of December 2025

Correction Probability: 60%

Why "YES" (Selling): Major funds are "closing their books." Given the 130% year-to-date rally, fund managers need to lock in performance for their annual reports. This is a standard procedure known as "window dressing."

Why "NO" (Holding): The market is awaiting Trump’s official announcement regarding the next Fed Chair. If this happens before December 31, the FOMC-related FOMO (fear of missing out on a massive rally) could outweigh the urge to take profits.

Phase 2: January 1 – January 31, 2026

Correction Probability: 40% (high initial risk, but likely to be "bought on the dip")

Seasonal Factor: January is historically the strongest month for silver (rising in 65% of cases over the last 20 years, with an average return of +3.3%).

Industrial Demand: At the start of the year, manufacturing companies typically replenish their physical silver inventories.

Political Momentum: If the new Fed Chair is confirmed, the market will begin pricing in aggressive rate cuts for 2026, triggering a fresh wave of buying pressure.

Probabilities for the Next FOMC Meeting (January 28, 2026)

The market is leaning toward the Fed taking a pause following the December rate cut:

76–79% probability of the Fed holding rates steady (keeping the target range at 3.50–3.75%).

21–24% probability of another 25-basis-point (bps) cut (lowering the range to 3.25–3.50%).