Silver's Squeeze Meets Washington's Yield Wall

COMEX silver settled at $61.70 as Fed minutes signaled more tightening; Shanghai stocks hit 2015 lows while LBMA delegates forecast $94.70.

Chinese vaults are draining at a pace not seen in years, yet silver traders in New York and London spent Tuesday fixated on something else entirely: the relentless climb of US government bond yields.

Stockpiles at the Shanghai Futures Exchange have slumped to their weakest level since 2015, while reserves on the Shanghai Gold Exchange have dropped to a more-than-nine-year low, according to Bloomberg. The culprit is a record-breaking wave of physical metal heading west. Chinese silver exports topped 660 tonnes in a single October — an all-time high — with the bulk of those shipments landing in London vaults. Domestic industrial and manufacturing demand added further strain, pulling metal out of warehouses even as China's Golden Week holiday brought trading to a standstill from late September.

The picture looks steadier on the other side of the Pacific. COMEX inventory data for October 5 showed 337.94 million ounces on hand, split between 102.29 million ounces of registered silver and 235.65 million ounces classified as eligible.

Fed Minutes Keep the Pressure On

Those shrinking Asian stockpiles did little to lift prices. The minutes from the Federal Reserve's September 15–16 meeting, released Tuesday, laid bare the central bank's continued tightening bias. Policymakers voted unanimously to raise the benchmark rate corridor by 0.25 percentage points to 3.75%–4.00%, and the majority of FOMC members signaled that another hike before year-end remains likely.

Rising energy costs lent additional support to the dollar, according to Reuters, while climbing Treasury yields weighed heavily on non-yielding assets such as precious metals. COMEX front-month silver settled Tuesday at $61.70 an ounce — 5.7% below its 50-day moving average of $65.46. Year-to-date, the metal is down 13%, with rate uncertainty currently drowning out the physical tightness story.

Long-Horizon Bulls See $95

Not everyone is focused on the near term. At the London Bullion Market Association's annual gathering in Sorrento, Italy, delegates projected silver at $94.70 an ounce over the coming twelve months — a gain of more than 54%. Some individual survey readings put the target as high as $97.

That optimism rests on structural demand drivers. Conference attendees pointed to industrial consumption, mounting geopolitical risks and swelling sovereign debt burdens — all traditional tailwinds for precious metals. Currency reserve diversification plays a role too: a companion UBS survey found that 65% of reserve managers hold precious metals for diversification purposes.

The industrial outlook is more nuanced. Deutsche Bank noted that silver consumption in the global solar sector is likely to decline as the amount of material used per cell shrinks. Analyst Daniel Ghali pegs the average spot price at roughly $70 an ounce for the second quarter of 2027.

A 49% Gap to the High

For now, the bond market holds the upper hand. Yields on long-dated US Treasuries have pushed to their highest levels since 2002, raising the opportunity cost of holding commodities that pay no interest while simultaneously buttressing the dollar.

Tuesday's $61.70 close leaves silver 49% below its 52-week peak of $121.78 an ounce. Between the bullish medium-term forecasts from industry veterans and the monetary headwinds bearing down on prices, two opposing forces are colliding across commodity markets — and neither shows signs of yielding.