Frenzied demand for silver, led by China, pushed XAG/USD to a record high above 120. Citigroup said the rally would extend to 150. However, the sell-off appears to be a bubble bursting. Let’s discuss this and outline a trading plan.
The article covers the following subjects:
Major Takeaways
- The silver market has lost touch with fundamentals.
- The XAGUSD rally has been speculative.
- The white metal is trading like meme stocks.
- A rebound from $98.3 and $93.1 is a reason to buy silver.
Weekly Fundamental Forecast for Silver
The higher they fly, the harder they fall. After XAG/USD posted its fastest one-day jump since the 2008 global financial crisis, up 14%, and hit a record high above 120, prices plunged. Analysts cite two main triggers: the rising odds that Kevin Warsh will become Fed Chair and the lower risk of a new government shutdown. But what if the real story runs deeper? What if the bubble has burst?
Just a couple of years ago, silver traded near $20 per ounce. Today, it can swing by $20 in a single week. Daily turnover in the largest dedicated ETF, iShares Silver Trust, has reached $40 billion, which is comparable to trading volumes in S&P 500 ETFs. For comparison, ETF volumes linked to NVIDIA and Tesla stand at $22-23 billion, even though those markets are far larger.
Trading Volumes in Silver ETFs vs S&P 500 ETFs
Source: Bloomberg.
According to Vanda Research, retail investors poured $921.8 million into silver ETFs from mid-December to mid-January, the biggest one-month inflow on record. Their combined holdings climbed to 835 million ounces, close to an all-time high.
China has led the buying frenzy. Investors have treated the large Shanghai premiums as a signal that London and New York prices “should” trade higher.
Silver Premium Dynamics in Shanghai and London
Source: Bloomberg.
Citigroup’s bullish outlook also fueled demand, projecting that XAG/USD would rise to 150 over the next three months. The idea was simple: silver behaves like gold on steroids and will keep climbing until it becomes historically expensive relative to the sector leader. In 2011, the gold-to-silver ratio stood at 32. To return to that level today, silver would need to trade at $170 per ounce.
In my view, the white metal traded like meme stocks, dropping like a stone at the first signs of market stress. Investors rotated capital from other markets after XAG/USD surged 150% in 2025 and rose another 60% into early 2026. As a result, prices have jumped 320% over the last three years. For comparison, gold is up 160%, platinum 120%, and palladium just 8%.
The market has clearly detached from fundamentals. At these prices, silver becomes too expensive for industrial use. The key question is when the XAG/USD bubble breaks. It may be breaking right now. Hedge funds have sold into the rally, cutting net longs from 50,000 contracts in June to 11,300.
Weekly Trading Plan for XAG/USD
Going against the crowd is risky. Buyers will likely start buying silver on rebounds from $98.3 and $93.1 per ounce. Still, I doubt the uptrend will recover. In my view, it is time to shift from short-term buying to medium-term selling. One option is to combine long positions in XAU/USD with shorts in XAG/USD.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of XAGUSD in real time mode
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