Insights 
VT 
The decline in Silver prices is closely linked to the drop in Gold, suggesting a consolidation in precious metals. This is attributed to a liquidity crisis rather than demand, with Silver price movements connected to liquidations similar to those in Gold.
Silver’s price action depends on liquidity changes, with London’s inventories potentially increasing by 50% from their October lows in a few weeks. This means the market no longer needs to find a price for Silver to enter the London system from unconventional sources, impacting the bull market driver.
Industrial Demand for Silver
Industrial demand for Silver is weaker compared to the start of the year, leaving speculative demand to influence Over-the-Counter Silver demand changes. Export controls, including potential tariffs, pose a market risk, although Silver faces less tariff threat compared to PGMs, zinc, nickel, tin, and cobalt.
The recent decline in silver prices is tightly correlated with gold’s, but we see the main driver as a liquidity event, not a collapse in demand. An unprecedented wave of physical silver is refilling London vaults, which is the most significant factor at play right now. This effectively caps the upside potential that was driven by fears of a physical shortage earlier this year.
This influx of metal is substantial, as we estimate that London’s free-floating inventories could rise by nearly 50% from the lows seen just a few weeks ago in early October 2025. Recent data from the London Bullion Market Association (LBMA) already shows a noticeable increase in stocks, climbing back above 900 million ounces. This rapid build in supply means the market no longer needs to bid prices higher to attract metal from non-traditional sources.
Derivative Trading Strategies
For derivative traders, this suggests that bearish strategies may be favorable in the coming weeks. We believe selling out-of-the-money call options or establishing bear call spreads could be a prudent way to capitalize on the limited upside. The increased supply is likely to act as a strong resistance level for any price rallies.
The gold-silver ratio provides further evidence for this view, having widened significantly from around 84:1 in August to over 91:1 today. This indicates silver is underperforming gold, which is consistent with a silver-specific supply glut. We could see this ratio continue to expand toward the 95:1 level if this trend of physical repletion continues.
Speculative positioning also confirms this shift, as recent Commitment of Traders reports show managed money has reduced its net long positions in silver futures by over 25% this month. Meanwhile, industrial demand remains sluggish compared to the start of the year, removing a key pillar of support. Traders should watch for any surprise announcements on export controls or tariffs, but we see this as a low-probability risk for silver compared to other industrial metals.
