Analysis of the Impact of U.S. Banks Reducing Silver Short Positions on the Market

According to the latest market data, the silver short positions of the top five U.S. banks plummeted from 34,738 contracts to 18,413 contracts, a decrease of 47%. Meanwhile, silver futures trading volume reached 204,585 lots (equivalent to approximately one year of global silver production), but open interest remained almost unchanged, indicating that the market is experiencing a clear

phenomenon [1].

Data analysis shows that banks’ reduction of short positions had a significant positive impact on silver prices:

• Pre-August average price:
  $30.51
• Post-August average price:
  $42.76
• Price change:
  +40.16% [0]

As can be seen from the chart, silver prices experienced an astonishing rise in 2025, with an annual gain of 114.37%. The current price is $57.73, far exceeding the start-of-year price of $26.93. Technical indicators show that the RSI is as high as 80.59, indicating that the market is in a severely overbought state.

The gold-silver ratio, an important indicator for measuring silver’s relative valuation to gold, has also undergone significant changes:

• Start-of-year gold-silver ratio:
  70.00:1
• Current gold-silver ratio:
  93.02:1
• Change before and after bank actions:
  Rose from 67.79:1 to 76.59:1 (+12.97%) [0]

COMEX silver warehouse receipt coverage rate plummeted to 23%, and open interest accounted for 9.4% of monthly production. Silver shorts in the U.S. market face severe short squeeze risks [2]. When banks cover short positions on a large scale, they must buy an equivalent number of silver contracts to close their positions, which directly pushes up spot and futures prices.

The global silver market has been in structural deficit for five consecutive years, with industrial demand accounting for nearly 60% of total demand [3]. In 2025, global visible silver inventories can only cover 1.2 months of world consumption, far below the safe boundary of 3-6 months [2].

The Federal Reserve’s interest rate cut cycle injected a “booster shot” into the silver bull market. Global silver ETF holdings increased by more than 500 tons in half a year, and speculative long positions increased by 12% in a single month after the September rate cut [2].

• Technical correction risk:
  RSI indicates severe overbought conditions; a technical adjustment may occur in the short term
• Increased volatility:
  Surge in trading volume but flat open interest indicates obvious emotional trading characteristics in the market

• Target price range:
  Multiple institutions predict silver will stabilize in the $55-$65 range [2]
• Gold-silver ratio repair:
  If the gold-silver ratio returns from the current 93:1 to the historical average of 70:1, silver still has about 30% upside potential

• Optimistic scenario:
  Analysts predict silver may break through $100 in 2026 [4]
• Extreme scenario:
  If the gold-silver ratio returns to the historical low of 16:1, the theoretical target price of silver could reach $300 [5]

1. Regulatory risk:
   With abnormal price fluctuations, regulatory authorities may implement stricter risk control measures
2. Technical adjustment:
   The current RSI is as high as 80.59, indicating a technical need for a sharp correction
3. Macroeconomy:
   A shift in Federal Reserve policy or a stronger U.S. dollar may put pressure on silver

Wait for a technical correction to the $50-$52 range to build positions in batches, and set strict stop-losses.

Buy on dips, target $65-$75, but need to control position size and closely monitor regulatory developments.

Considering silver’s rigid demand in emerging industries such as AI, photovoltaics, and electric vehicles, it can be an important supplement to long-term investment portfolios.

The reduction of silver short positions by U.S. banks marks a historic structural transformation in the silver market. This is not just a simple issue of capital flow, but also reflects silver’s transformation from a pure financial asset to a dual attribute of “industrial + financial”. Although there is a risk of overbought correction in the short term, medium- to long-term fundamentals are strongly supported, especially considering the rigid demand for silver from the AI revolution and energy transition. Silver’s investment value deserves continuous attention.

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[0] Jinling API Data
[1] Sina Finance - “Global Silver Prices Hit New Highs Repeatedly; Rational Investment in the ‘Runaway Mustang’” (https://finance.sina.com.cn/money/future/2025-12-13/doc-inharuwi4622241.shtml)
[2] Wall Street Journal Chinese Edition - “After a 115% Surge, How High Can Silver Go? Analysts: Break Three Digits Next Year” (https://wallstreetcn.com/articles/3761191)
[3] Jinshi Data - “Has the Gold-Silver Ratio Not Hit Bottom Yet? Silver Hits New Highs But Remains Cheap; Analysts Call for Buying on Dips!” (https://xnews.jin10.com/details/203205)
[4] Cnyes - “JPMorgan Turns Against Wall Street: Hoard Silver, Card Gold, Short Dollar Credit” (https://news.cnyes.com/news/id/6272959)
[5] NetEase Finance - “‘Skyrocketing’ Silver: Should You Sell or Buy?” (https://www.163.com/dy/article/KGJT2VGP0519BD5M.html)