8 January 2026 Punjab Khabarnama Bureau : Goldman Sachs has warned that silver prices are likely to remain volatile in the near to medium term due to a tightening supply situation in London, one of the world’s most important hubs for precious metals trading. According to the investment bank, shrinking inventories and logistical constraints in the London bullion market are creating sharp price swings, raising uncertainty for investors, industrial users, and traders alike.
Silver has seen heightened price movements in recent months, outperforming several other commodities amid a combination of strong industrial demand, investment inflows, and supply-side pressures. Goldman Sachs noted that the situation in London has become particularly critical, as available silver inventories have fallen to levels that are insufficient to comfortably meet short-term delivery demands.
London plays a central role in global silver trading, acting as a key clearing and storage centre for over-the-counter precious metals transactions. Any disruption or tightening in inventories at London vaults can therefore have a ripple effect across global markets. Goldman analysts said the current squeeze is amplifying price volatility, especially during periods of heightened demand.
One of the main drivers behind the inventory crunch is sustained industrial demand. Silver is widely used in sectors such as electronics, solar energy, electric vehicles, and medical equipment. As global efforts toward energy transition and digitalisation accelerate, demand for silver in manufacturing has continued to rise. This structural demand, Goldman noted, is unlikely to ease in the near term.
At the same time, investment demand has also picked up, with investors increasingly turning to silver as both a hedge against inflation and a diversification tool amid global economic uncertainty. Exchange-traded products backed by physical silver have seen fluctuating inflows, contributing to pressure on available inventories in key trading centres like London.
Goldman Sachs also highlighted logistical challenges affecting the silver market. Transporting large quantities of silver between regions is costly and time-consuming, and regulatory requirements around vaulting and delivery further complicate supply adjustments. As a result, short-term shortages in one market cannot be easily or quickly resolved by reallocating supply from elsewhere.
The bank cautioned that these factors are creating conditions where even relatively small changes in demand or supply expectations can trigger outsized price movements. This explains the sharp intraday swings and sudden rallies or pullbacks observed in silver prices in recent weeks.
Market participants have also pointed to the divergence between paper and physical silver markets. While futures and derivatives markets reflect expectations and sentiment, the physical market is constrained by actual metal availability. Goldman Sachs warned that this disconnect could widen during periods of stress, increasing the risk of volatility and price dislocations.
Another factor contributing to uncertainty is the broader macroeconomic environment. Expectations around interest rates, currency movements, and central bank policies continue to influence precious metal prices. While higher interest rates typically weigh on non-yielding assets like silver, concerns about economic slowdown and financial stability have supported demand for safe-haven assets.
Goldman Sachs noted that silver’s dual role as both a precious and industrial metal makes it particularly sensitive to shifts in economic outlook. Any change in growth expectations, especially in major economies such as the United States, China, and Europe, can quickly alter demand projections and trigger market reactions.
For investors, the bank advised caution, emphasising that silver’s fundamentals remain strong over the long term but that near-term price action could remain choppy. Portfolio managers may need to factor in higher volatility when allocating to silver or silver-linked assets.
Industrial users, meanwhile, face the challenge of managing procurement costs amid unpredictable price movements. Some manufacturers have reportedly increased forward buying or hedging activity to protect against further price spikes, adding another layer of complexity to the market.
Despite the short-term turbulence, Goldman Sachs remains constructive on silver’s long-term outlook, citing energy transition trends, constrained mine supply growth, and sustained industrial demand. However, the bank stressed that as long as the London inventory squeeze persists, volatility is likely to remain a defining feature of the market.
As global demand patterns evolve and supply adjustments take time, silver prices may continue to experience sharp swings. For now, Goldman’s warning serves as a reminder that tight physical markets can amplify volatility, making silver one of the more unpredictable commodities in the current global environment.
Summary
Goldman Sachs has cautioned that silver prices may remain volatile as tight inventories in London, strong industrial demand, and logistical constraints continue to strain physical supply and amplify market price swings.