Silver's Physical Squeeze Faces Off Against a Hawkish Fed

Silver traders are navigating a market pulled in two directions at once. A day after a sharp 6.0% slide in US trading sent the metal down to $55.80 an ounce on Wednesday, prices bounced back on Thursday, with COMEX silver closing 3.2% higher at $57.60. The whipsaw price action reflects a market caught between persistent tightness in physical supply and mounting pressure from US monetary policy.

The week's turbulence traces back to US inflation readings that landed with force. The September consumer price index rose 3.7% year-on-year, while the producer price index climbed 6.3% over the same period. Those figures hardened expectations that the Federal Reserve will keep policy restrictive for longer, and at one point markets priced a December rate hike at close to 99% probability. Because silver pays no yield, rising rates and a firmer dollar tend to work against it, and the metal sold off immediately.

Warsh in Bangkok, CFTC Data in Focus

Attention now turns to Fed Chairman Kevin Warsh, who addresses the International Monetary Fund's annual meetings in Bangkok on Friday. His tone will be closely parsed for any hint of how firmly the central bank intends to hold its line. A first counter-move already emerged Thursday, when falling US Treasury yields gave silver some breathing room, though whether that impulse holds depends heavily on what Warsh signals.

Alongside the speech, the CFTC releases its weekly positioning report. The last reading showed open interest on the US futures market falling by 1,917 contracts to 105,130 — a sign that institutions are trimming exposure rather than adding risk in an uncertain environment. Friday's data will reveal how far that retreat has gone.

Vault Stocks Climb on Both Sides of the Pacific

Physical supply tells a different story. The CME Group reported midweek that COMEX inventories rose by 1.2 million ounces to 333.2 million ounces, split between 103.1 million ounces in the "registered" category and 230.1 million ounces in "eligible." In Asia, Shanghai Metals Market put Chinese social silver stocks at 3,909 tonnes as of Thursday.

Those swelling stockpiles have revived talk of a longer-term shift in the market balance. Deutsche Bank, according to media reports on October 7, floated the possibility of a global silver surplus by 2027, pointing to rising warehouse reserves alongside cooling industrial demand. The skepticism is visible in the longer chart too: silver is down 21% year-to-date and remains well below its highs from recent months.

A Survey Betting on $94.70

Not everyone shares that caution. A poll of market experts at an LBMA industry conference produced an average twelve-month forecast of roughly $94.70 an ounce, suggesting a meaningful slice of the industry still sees room for the metal to run. Traders caution that such surveys mainly capture the mood of those surveyed; the real path will be set by real interest rates and the health of global industry.

Against that backdrop, the physical market continues to run short. Research from Metals Focus and the Silver Institute projects a worldwide deficit of 46.3 million ounces in 2026, following 40.3 million ounces in 2025, with mine output expected to stay largely flat.

Technical Picture Still Fragile

On the charts, the setup remains delicate. Silver is trading about 11% below its 50-day moving average, a gap that underscores how much ground has been lost. Whether the physical shortfall is enough to offset the drag from rates will decide how prices settle in the weeks ahead.