Goldman Sachs has issued a stark warning: the extreme volatility in silver prices is set to continue. After experiencing an astonishing rally throughout 2025, the dynamics of the silver market have fundamentally shifted, primarily due to drastically low inventories in London, which is a key trading hub for precious metals.
In the previous year, silver prices skyrocketed by nearly 138%. This dramatic increase was fueled by a mix of robust inflows from private investors, anticipations surrounding the easing policies of the Federal Reserve, and a heightened demand for diversification within investment portfolios. However, Goldman Sachs argues that these fluctuations in price cannot be solely attributed to demand. Instead, they highlight a significant liquidity squeeze affecting the London market, where global benchmark prices are determined. This tightening has exacerbated even minor changes in market positioning, leading to greater price volatility.
The bank points out that speculation regarding potential U.S. trade policies throughout 2025 led many market participants to shift their physical silver holdings to the United States. This occurred despite the fact that silver was ultimately exempt from tariffs in April. As a result, this preemptive movement drained London’s inventories, making the market increasingly sensitive to shifts in demand. Consequently, the elasticity of prices has surged; typically, a weekly demand of 1,000 tonnes would result in a price increase of around 2%, but now, Goldman estimates this same volume could drive prices up by approximately 7%.
This tightening of inventories has fostered an environment ripe for 'squeeze-like' behavior, which helps explain the pronounced price swings observed recently. While exchange-traded funds (ETFs) backed by silver have capitalized on this upward trend, Goldman cautions that the volatility is a double-edged sword and advises clients to be cautious about projecting recent gains into the future.
Looking forward, the bank identifies additional threats to market stability. For instance, China’s decision to implement export controls on silver shipments starting in January introduces another level of market fragmentation. This move could further limit supply and heighten volatility, regardless of any resolutions in U.S. trade policy uncertainties.
In summary, Goldman Sachs's outlook is clear: until market inventories are restored and liquidity returns to normal levels, silver prices will likely remain highly susceptible to rapid changes, creating opportunities for investors comfortable with such volatility while presenting challenges for those who prefer a more stable investment approach.
