Silver’s structural breakout
Ole Hansen, Head of Commodity Strategy at Saxo Bank, noted that the surge in silver is a reflection of a deep disconnect. “The current surge reflects a deep and widening disconnect between physical availability, amplified by a favourable macro backdrop and a market structure exposed to a squeeze,” he stated.
The physical squeeze
The most immediate catalyst for the sharp price action can be traced to a dramatic tightening in the London physical market in October. Heavy and persistent drawdowns from London vaults, driven by strong demand from the US and India, have led to a collapse in “free-float” inventory, metal not tied up in long-term contracts or investment vehicles.
“As availability dwindled, silver lease rates spiked sharply, forcing those short physical to scramble for cover,” Hansen explained. “With little metal available for prompt delivery, the squeeze dynamic intensified. This is the type of market where price becomes secondary; the priority becomes securing any available ounces.”