Why the silver squeeze is finally about to end, analyst says

By Jules Rimmer

A squeeze in the price of silver may soon abate, a strategist argues.

One commodity analyst believes the squeeze in silver prices is reaching a crescendo, and market dislocations have become so acute that they may "self-resolve" in coming weeks.

After its 61% rise this year, silver is riding at a fourteen-year high and within spitting distance of an absolute peak reached 45 years ago.

At $47 per ounce, silver (SI00) is closing in on $49.95 recorded in 1980. In 2025 at least, silver has meant first place and gold (GC00) with a 47% return in second.

TD Securities' Daniel Ghalil published an update Thursday in which he observed that silver lease rates, which is the interest rate charged to borrow silver, has risen to "extreme levels," which demonstrates just how depleted stockpiles are in the inventory of the London Bullion Market Association. The LBMA is the most important wholesale market for gold and silver globally.

Positioning by momentum traders or CTAs has been mounting steadily throughout the summer

Ghalil reported that Indians doubled their imports of silver in September and this buying activity further drained those reserves. The squeeze in silver was then exacerbated by the absence of Chinese players from the market this week, many of whom were celebrating the Golden Week holidays.

The lack of Chinese supply that normally backstops London simply amplified the price movement. Exchanges For Physical, whereby holders of physical silver can deliver that to meet a futures contract, declined sharply, explaining the tightness in the London market. This should ease when Chinese participants return to the market next week, Ghalil predicted. The gap between futures and the physical is wide enough, he argued, that the arbitrage window may remain open for a while, encouraging the sale of physical silver.

This liquidity boost forecast for next week could remove the primary technical driver of the silver price spike that saw it suddenly overtake gold's performance over the summer.

Another technical indicator, the relative strength index which measures how overbought or oversold a security is, on silver reached 82 this week. In a posting on X Thursday, the Kobeissi Letter, an investment bulletin, pointed out silver has reached this level five times since 1987 and on each occasion was lower nine months later.

The silver boom this year, however, is far from a technical phenomenon. As a precious metal, silver is often bracketed with gold as an inflation hedge and a store of value in times of economic uncertainty and geopolitical volatility.

Mohammed El Erian, formerly CEO at Pimco, remarked Thursday on X that silver is part of the "debasement trade" (a function of investors concerned about the viability of fiat currencies, especially the dollar DXY ) along with gold and bitcoin (BTCUSD), while also reflecting the notion of U.S. Treasurys as a haven in times of financial stress is no longer applicable.

Silver shares many attributes with gold but is often considered to offer more beta in up markets (a higher beta implies more pronounced moves than the market overall and in silver's instance is partly owing to lower liquidity. This means that inflows and outflows have a disproportionately large impact.). It also boasts industrial applications in solar, electricity generation and energy technology that gold can't compete with generally.

Back in January 1980, when the billionaire Hunt brothers attempted to corner the market in silver and drove the price up to almost $50 per ounce, exchanges took action to prevent the monopoly bid and suspended trading, When the market reopened fully in March of that year, the price crashed to $10 on "Silver Thursday".

Prices may correct next week, according to TD Securities, but probably not to that extent.

-Jules Rimmer

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