Silver prices are falling, closely mirroring the drop in gold. This suggests that precious metals are stabilizing. The decline is mainly due to a liquidity crisis and not a lack of demand, with silver price changes tied to liquidations much like gold. Silver’s price is influenced by shifts in liquidity. London’s silver inventories could increase by 50% from their October lows in just a few weeks. This means the market won’t need to set a new price for silver as it comes in from less common sources, which affects the bullish trends.

Industrial Demand for Silver

The demand for silver in industry has decreased compared to the beginning of the year, leaving speculative demand to sway Over-the-Counter silver demand. Export controls, including possible tariffs, create market risks, but silver is less affected by tariffs than metals like PGMs, zinc, nickel, tin, and cobalt. The recent drop in silver prices follows gold’s decline, but the main cause is a liquidity event rather than falling demand. A large amount of physical silver is filling London’s vaults, significantly impacting the market by capping upside potential driven by earlier fears of shortages. This influx is considerable, with estimates suggesting that London’s free-floating inventories could jump nearly 50% from their recent low in early October 2025. Current data from the London Bullion Market Association (LBMA) shows an increase in stocks, now above 900 million ounces. This rise in supply tells us that the market doesn’t need to raise prices to draw in metal from non-traditional sources.

Derivative Trading Strategies

For derivative traders, this suggests that bearish strategies may be the way to go in the coming weeks. Selling out-of-the-money call options or creating bear call spreads could be a smart move, given the limited upside potential. This increased supply is likely to become a strong resistance barrier during any price rallies. The gold-silver ratio supports this idea, having expanded from around 84:1 in August to over 91:1 today. This widening indicates that silver is lagging behind gold due to an excess of supply. If the trend continues, we might see this ratio approach 95:1. Speculative positioning also backs this shift. Recent Commitment of Traders reports show that managed money has cut its net long positions in silver futures by over 25% this month. Meanwhile, industrial demand is still weak compared to the start of the year, removing a key support factor. Traders should keep an eye out for any unexpected news about export controls or tariffs, but the risk for silver in this area is lower than for other industrial metals. Create your live VT Markets account and start trading now.

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