By Jules Rimmer

Technicals have supercharged the silver rally and the shortage of bullion for delivery in London threatens to render the market disfunctional. - Getty Images/iStockphoto

Despite rallying by two thirds in 2025, the price spike in silver shows no sign of abating and, if anything, seems set to become even more extreme, say analysts.

As prices climbed Monday, Bank of America’s global commodity team on Monday published a bullish outlook for precious metals and stuck a $65 per ounce price target on silver for 2026. While they acknowledge a short-term correction is plausible, and physical demand may decline 11% in 2026, lead analyst Michael Widmer still anticipates a physical deficit and that justifies his forecast of a 30% rally.

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Having broken $50 an ounce and exceeded its previous record high at the end of last week, spot silver traded towards $51.50 on Monday, pushing past a peak seen last week. Comex silver futures SI00, meanwhile, climbed 5% to $49.71 an ounce, and were poised to take out a settlement record of $48.99 reached Oct. 8, which beat the previous January 1980 record of $48.70 an ounce.

With physical demand exceeding supply and rates to borrow silver surging beyond 100%, the only resolution to the present squeeze is higher pricing, allowing the market to clear, wrote precious metals analyst David Jensen in a Substack post over the weekend.

Jensen said the London Bullion Market Association — the world’s most important trading hub for silver — is “effectively having a seizure,” and has been reduced to a state of lock-up because there is not enough physical silver deliverable into the billions of dollars of spot contracts that have been entered into. The London market has ruptured to the point of disfunctionality because the free float of silver is too small to accommodate demand at present, he said.

Read: The price of silver is on track for a historic breakout. Why it has taken 45 years to get here.

Saxo Bank’s commodity strategist, Ole Hansen, also noted in a report published Friday that “the London silver cash market has entered a period of pronounced stress” owing to the shortage of available inventories. He said London silver spot prices are now commanding a hefty premium over silver futures trading on Comex in Chicago, owing to the physical shortage. Inventories of silver held in London have declined by a third since 2021.

London's Available Silver Vault Stock. Inventories Are In Decline. - LBMA

Bloomberg reported Monday that traders were booking cargo slots on airplanes to fly physical silver to London and exploit the disparity.

Further evidence of the short squeeze is the backwardation in the silver market, whereby spot prices are higher than those of futures contracts. Typically, owing to storage and financing costs, silver prices are in contango where spot prices are the lower of the two. At one stage in early Monday, trading spot prices were $50.21, for example, whereas December futures were $48.03.

To illustrate the problem, the Bullion Vault daily commodity bulletin reported last week that the largest silver exchange-traded fund SLV needed 15,415 tonnes of silver to back all its shares in issue. That’s seven months of global output. The next two largest silver ETFs require 3.8 months of global mine output.

Hansen observed that dislocations in the silver market are not unprecedented, but the magnitude is. The short squeeze forcing the price inexorably higher at present is building on fundamental drivers that have been apparent throughout 2025. The so called “debasement trade” has created intense demand for precious metals as investors have flocked to stores of value, hedges against dollar DXY weakness and inflation and diversification away from fiat currencies.

Silver was to some extent also flying in the slipstream of gold’s GC00 momentum earlier on in the year, but as Saxo Bank’s Hansen emphasized, the structural case for silver is strong owing to industrial demand from solar panel manufacturers and the technology sector.

The gold-silver ratio at present is 81x. Hansen reckons the 20-year average is more like 70, supporting the argument that silver has further upside.

Gold prices were also pushing towards a new high on Monday, up $92.50, or 5.2%, to $4,091 an ounce. The contract hit a settlement high of $4,043 on Wednesday, October 8, 2025. Bank of America said it expects a $5,000 gold price for 2026.

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