Silver Market Turmoil: Run on the Metal Drives Prices to $75

The precious metals market has recently experienced unusual volatility. On December 26, silver prices surged to $75.15/ounce, while gold rose to $4,531/ounce, both hitting new records. Even more astonishing, since early 2025, silver has increased by 158%, far outpacing gold's 72% rise.

What is behind this rare surge? The key word: "Run on the Bank."

The London silver market is undergoing severe physical run pressure. Investors are selling off paper silver contracts en masse and rushing to buy physical silver, causing a critical indicator—the 1-year silver swap rate spread over US interest rates—to plummet to an extreme of -7.18%. What does this number indicate? It shows that physical silver is in extreme shortage.

Why is this happening? Changes on the supply side are the main cause. Expectations that Trump might impose tariffs on silver have prompted global investors to transfer large silver holdings to the US. As a result, silver inventories at exchanges worldwide are rapidly depleting, leading to short squeeze conditions and spreading extreme speculative sentiment.

Escalating geopolitical tensions and expectations of Federal Reserve rate cuts are further fueling the situation. Events such as the US blockade of Venezuelan oil tankers and airstrikes in Nigeria have heightened market demand for safe-haven metals.

Where is silver headed in the future?

Analysts are generally bullish. Dutch trading expert Karel Mercx pointed out that as long as the 1-year silver swap rate minus US interest rates remains negative, upward pressure on silver will be difficult to relieve. In other words, the run on the bank will continue to exert pressure.

US economist Peter Schiff believes that reaching $100/ounce in 2026 is a "very realistic target." If monetary market instability worsens, prices could break even higher. French bank BNP Paribas also issued a similar forecast, expecting silver to reach $100/ounce by the end of 2026.

More aggressive voices come from Jim Rickards, author of "Currency Wars." He predicts 2026 will be another explosive year for gold and silver. If gold prices hit $10,000 by the end of 2026, silver could break through an astonishing $200/ounce.

As physical run-offs continue, supply shortages deepen, and geopolitical tensions persist, how much more surprises can silver bring to investors? Only time will tell.