Extreme silver price volatility likely to persist in 2026, China controls risk market fragmentation – Goldman Sachs

“Thinner inventories have created conditions for squeezes, where rallies accelerate as investor flows absorb remaining metal in the London vaults and reverse sharply when tightness eases,” Goldman analysts Lina Thomas and Daan Struyven wrote in a Wednesday note.

The analysts said that the price turbulence is not being driven by a global shortage of silver, but by localized supply bottlenecks that are keeping the market distorted.

Silver supplies in London, where the global benchmark price is set, are unusually low after much of the metal was moved into U.S. vaults last year amid concerns that the Trump administration could impose trade tariffs.

Silver's historic 2025 rally was driven by investor inflows tied to safe-haven buying, Fed rate cut expectations, and asset diversification, they said, but the London squeeze is amplifying the impact of these moves.

Thomas and Struyven said that under normal conditions, a weekly net demand of 1,000 metric tons would lift silver prices by around 2%, but in the current environment, Goldman estimates that sensitivity has surged to about 7%. The analysts warned that these extreme price moves will likely persist – in both directions.

And even at these all-time high prices, the analysts said investor demand may not be overstretched. They point out that silver ETF holdings remain below their 2021 peak, and could rise higher on the back of rate cuts and investor diversification.

On the other hand, silver prices could pull back if trade policies are clarified and silver flows out of U.S. vaults and back to London – but any lingering policy uncertainty will likely keep the metal stateside. Goldman noted that most of the gold that moved into New York COMEX vaults stayed there even after Washington announced that gold would remain exempt from tariffs.

"If silver follows the same pattern, most silver may remain in New York COMEX vaults and extreme price action could persist even after a definitive statement on US silver tariffs,” Thomas and Struyven wrote.

China’s new 2026 export restrictions, which now require official approval for outbound silver shipments, have only added to the volatility. Goldman said this move could actually fragment the global silver market, reducing liquidity while amplifying price swings.

“Disruption risk may prompt participants to secure their own stockpiles rather than share buffers globally,” the analysts said. “This shift from a pooled global system to isolated regional inventories would create an inefficient structure — transforming a smooth, integrated market into one prone to sharp, localized price swings.”