Silver Market at a Crossroads: Index Selling Meets Physical Shortage

The silver market is currently being pulled in opposite directions. On one side, a massive technical sell-off is underway as major commodity indices rebalance. On the other, the physical market for the metal remains extraordinarily tight, constrained by persistent supply deficits. With prices hovering around $78—just shy of the all-time high from late December—the central question is which force will prevail.

The fundamental backdrop for silver remains bullish, rooted in a multi-year supply-demand imbalance. The industrial sector's appetite, particularly from photovoltaics and broader electrification trends, continues to outstrip available supply. This marks the fifth consecutive year of a deficit in mine production.

A key structural issue is that approximately 70% of silver is mined as a by-product of copper, lead, and zinc operations. This means primary supply is relatively inelastic and cannot quickly ramp up to meet higher prices, creating a sustained floor for the market. The physical tightness is evident in the London spot market, which is grappling with delivery bottlenecks. A significant portion of accessible inventories remains locked in New York vaults, a lingering effect of tariff concerns from the previous year.

A Technical Tsunami of Selling

Counteracting this fundamental strength is a substantial, yet temporary, wave of selling driven by index rules. The exceptional rally in 2025, which saw silver surge approximately 150%, has triggered mandatory portfolio adjustments for passive funds tracking major commodity indices.

Analysts at Citigroup estimate these funds must sell roughly $6.8 billion worth of futures contracts. JPMorgan Chase notes the scale of this year's rebalancing significantly exceeds that of 2024. The selling pressure equates to about 12% of the total open interest on the COMEX, a considerable overhang. The impact was immediate: silver-linked ETFs recorded their largest outflows since October this past Wednesday. Although prices stabilized on Friday after a two-day dip, the technical headwind is expected to persist in the near term.

Should investors sell immediately? Or is it worth buying Silber Preis?

Bank Forecasts Turn Bullish

Despite the short-term selling pressure, the fundamental scarcity is leading financial institutions to revise their long-term price forecasts upward. HSBC anticipates the physical squeeze will likely persist, projecting an average price of $68.25 for 2026, within a trading range of $58 to $88. The bank does not foresee a resolution to the tightness until the second half of 2026.

Other analysts share this constructive view. BNP Paribas emphasizes that while index rebalancing may apply short-term brakes, silver possesses stronger long-term momentum than gold. Lukman Otunuga, an analyst at FXTM, suggests the $100 per ounce threshold is within reach if the current bullish factors remain intact. The gold-silver ratio, currently near 57, trades well below its historical average, indicating relative silver strength.

Geopolitics and Macro Data in Focus

Investors are also monitoring external catalysts. Geopolitical tensions, including US intervention in Venezuela and frictions between China and Japan, are bolstering silver's appeal as a haven asset. Market participants are also awaiting key economic data, such as the upcoming US jobs report, for clues on the Federal Reserve's interest rate path. Current market pricing indicates nearly a 90% probability of unchanged rates at the central bank's next meeting.

The extreme backwardation observed in CME futures contracts and record-high leasing rates in London serve as clear market signals of the immediate physical shortage, standing in stark contrast to the derivative-driven selling. The battle between these two powerful forces will define silver's trajectory in the coming weeks.