China National Investment Baiyin LOF experienced a huge intraday shock, with its limit-down price surging straight up to a gain of over 9%. What happened?

After experiencing three consecutive days of limit-up and two consecutive days of limit-down in the market, the Guotou Silver LOF once again showed extreme volatility on Monday morning.

On the morning of December 29th, after a one-hour trading halt, Guotou Silver LOF (161226.SZ) resumed trading and plunged straight to the limit-down. However, it only stayed briefly at the limit-down price before surging, once rising more than 9%. By the morning close, Guotou Silver LOF was up 8.80%, ranking first among LOF funds, with a trading volume of 1.81 billion yuan.

On the same morning, Guotou Silver LOF announced that on December 25, 2025, the net value per fund unit was 1.9469 yuan, and as of December 26, 2025, the closing price in the secondary market was 2.524 yuan, which was significantly higher than the fund's net value. It warned that investors blindly investing at a high premium may face significant losses.

Guotou UBS Fund stated that if the premium rate of Guotou Silver LOF's secondary market trading price does not effectively retreat on December 29, 2025, the fund has the right to apply to the Shenzhen Stock Exchange for an intraday temporary trading halt or to extend the halt period to warn the market of risks. Details will be subject to future announcements.

Since December, silver asset prices have seen a historic surge. On December 29th, spot silver quickly rallied after the opening, jumping nearly 6% to break through $83.99/oz, setting a new all-time high. The year-to-date increase exceeded 170%, far surpassing gold's 72% performance over the same period.

The surge in silver prices triggered a wave of investment in related products. As the Guotou Silver LOF's A and C class shares traded off-exchange were subject to purchase limits, fund investors turned to the exchange-traded Guotou Silver LOF.

The net value growth of Guotou Silver LOF lagged behind the performance of the silver futures index. However, on-exchange investors benchmarked silver futures' performance and traded Guotou Silver LOF, driving up the secondary market price far beyond the net asset value and further expanding the premium.

Since early December, Guotou Silver LOF has released 17 risk warning announcements and announced temporary trading halts 11 times. Previously, the fund halted trading for one hour at market open on December 12, 15, 17 to 19, 22 to 26, and 29.

Additionally, to effectively protect the interests of fund unit holders, Guotou UBS Fund recently announced that its Guotou UBS Silver Futures Securities Investment Fund (LOF) would further tighten purchase restrictions. The specific measures include suspending subscriptions for C-class fund units starting December 29, 2025, and lowering the daily purchase limit for A-class units to 100 yuan from the previous 500 yuan starting the same date.

Guotou UBS Fund warned that even if the fund's net asset value itself does not decline, investors who buy at high premiums may still suffer losses when the premium narrows or even turns into a discount—the higher the premium, the greater the risk of a pullback.

"Silver itself is a highly volatile asset." Guotou UBS Fund emphasized that from the perspective of silver's commodity attributes, silver inventories are low, and tight supply and demand support price gains. Due to the small market size, a surge in investment leads to tight spot supply and amplified price elasticity. Caution is needed against the risk of profit-taking when silver prices fluctuate at high levels.

Looking at the outlook for silver, many institutions have pointed out that the rally is driven by multiple factors, but also warn that short-term risks of a correction are accumulating.

CITIC Securities' research report stated that the craze for silver is fueled by multiple factors—a combination of financial attribute revaluation, physical supply-demand tightness, market sentiment, and macro environment catalysts.

"As a precious metal, silver’s financial attributes have become apparent after years of rising gold prices. With the expectation of Fed rate cuts, actual interest rates declining, and a weakening dollar, silver, due to its relative undervaluation compared to gold, has strong catch-up demand. The gold-silver ratio has dropped significantly from its highs, indicating capital rotation from gold to silver, pushing up silver's overall valuation. But with the current gold-silver ratio at 55, risk of a silver price correction should be watched," said CITIC Securities.

Galaxy Securities’ latest report also pointed out that the primary drivers of gold and silver price increases are rising safe-haven demand, bullish technical indicators, and heightened retail investor sentiment. The silver price trend cannot last, and a major correction could happen at any time due to profit-taking or liquidity shifts. It is forecast that future silver prices may be dominated by high volatility and oscillating trends.

Looking to 2026, CITIC Securities believes that the silver market will be at a crossroads full of opportunities and risks, with long and short factors intertwined and the market entering a "critical point" of contention. The bullish argument remains strong. However, huge risks cannot be ignored. The biggest challenge comes from accelerated technological substitution. The currently high silver price has forced the photovoltaic industry to vigorously push "de-silverization." Next-generation battery technologies like TOPCon and BC are using copper plating as an alternative and may realize a cliff-like drop in silver consumption by 2026. This would fundamentally undermine the outlook for long-term industrial demand for silver. "Moreover, high volatility is itself the biggest risk. As prices repeatedly hit new highs, the pressure for profit-taking is rising daily. This round of price rises is somewhat abnormal, and the risk of a short-term correction has increased significantly."

Source: The Paper

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