After delivering its strongest annual performance in more than four decades, silver's sharp price moves look set to continue.
According to Goldman Sachs, extreme volatility in the silver market is likely to persist, driven by tight physical supply in London, shifting trade flows to the U.S. and rising geopolitical frictions.
Why Silver's London Shortage Is Fueling Violent Price Swings
Silver – as tracked by the iShares Silver Trust (NYSE:SLV) – surged 136% in 2025, marking its best year since 1979, when the Hunt brothers attempted to corner the market. The rally extended into early 2026, with prices reaching a record high close of $81.16 per ounce on Tuesday.
The gains proved fragile. Prices fell 3.7% on Wednesday and were down a further 3.8% on Thursday morning.
"We expect extreme price swings to persist, both up and down, and advise volatility-averse clients to remain cautious," said Goldman Sachs commodity analyst Lina Thomas in a Thursday note.
Goldman analysts point to a liquidity squeeze in London, where global silver benchmark prices are set.
Speculation over potential U.S. tariffs on silver — theoretically as high as 50% — encouraged traders to ship large volumes of metal into the U.S. during 2025, even though silver was formally exempted from tariffs last April.
This drained inventories from London vaults, reducing the amount of metal readily available for trading.
At the same time, surging demand for physically backed silver ETFs absorbed additional supply. Most of the metal backing these funds is stored in London, intensifying the squeeze.
As inventories thinned, borrowing costs in the silver leasing market spiked — a classic signal of near-term physical tightness.
“Thinner inventories create conditions for squeezes,” Thomas said.
Lease rates in London, the cost to borrow physical silver, have spiked. Goldman estimates that while 1,000 tonnes of weekly net silver demand normally lifts prices by around 2%, that sensitivity has jumped to about 7% under current conditions.
Goldman Says Silver Volatility Is Structural, Not a Short-Term Fluke
Although Goldman sees U.S. tariffs on silver as unlikely, uncertainty itself is proving disruptive.
Even after Washington confirmed in August that gold would remain tariff-free, much of the metal stayed in New York COMEX vaults rather than returning to London.
Analysts warn silver could follow the same pattern, prolonging dislocation between markets and sustaining volatility even if policy clarity emerges.
“As long as silver remains dislocated in the U.S. and liquidity in London is not restored with silver from elsewhere, prices could rise even further if investor enthusiasm persists,” Thomas said.
China Adds Another Shock
China, one of the world's largest silver exporters, introduced export controls on Jan. 1. Shipments now require government approval.
Goldman said the measures do not guarantee that restrictions will be imposed. The threat alone could fragment the market, drain liquidity and amplify volatility.
The bank said participants may hoard supplies rather than share buffers globally. That shift could turn a once-integrated market into one prone to sharp regional price spikes.
What Comes Next For Silver?
Goldman said silver could still rise if investor enthusiasm continues and London liquidity stays strained. Physically backed ETF holdings remain below 2021 peaks. Managed money positioning in COMEX futures is below historical averages.
The downside risk remains large. Any meaningful restoration of the London supply could trigger a sharp pullback.
For now, Goldman's message is clear. Silver's wild swings are not noise. They are the market's new reality.
Photo: MIKE MANIATIS via Shutterstock
