Gold, silver squeezes intensify

Markets are desperately short of physical gold and silver, reflected in a continuing bear squeeze. Speculative interest remains subdued, with ETF physical demand growing.

As our headline chart below shows, as of last night’s close (Thursday), silver has risen by 76% this year so far, outpacing gold which is up a hefty 52%. Palladium also rose strongly, up 13% on the week and 59% on the year, and platinum is up a whopping 73% since 1 January. Even copper is moving higher, up 3.9% on the week and 21% on the year.

Inflation in 2026 is the elephant in the room.

In European trade this morning, gold was $3994, up $110 from last Friday’s close. And at $50.90, silver rose $3.00 over the same time scale. Physical liquidity in silver is particularly short, with lease rates reportedly at 19% at one stage, reflecting none being available to cover forward contract deliveries in London.

The short squeeze is also evident on Comex, with open interest failing to respond to a soaring price:

In a normal bull market, open interest and the price would be rising together as investors buy into the trend. It is noticeably absent here, as is also the case in gold:

There has been some recovery in gold’s open interest, but it is a long way from signalling an overbought market. Yet gold is continually making new highs. It should be noted that what we are seeing in both contracts is a technically powerful bull market, with investors yet to buy.

Charts are just one aspect. With major Wall Street banks now forecasting higher gold prices into 2026, their investment departments on behalf of their clients are wrongfooted. We are talking about trillions of dollars missing out. For now, those trillions are bewitched by the tech stock bubble, but there is increasing nervousness expressed by luminaries like Jamie Dimon of JPMorgan and super-successful hedge fund manager, Ray Dalio. And their message is beginning to get traction, set to fuel demand for precious metals.

Last week we pointed out that Comex is effectively the largest gold and silver mine in the world, delivering tonnes and tonnes into hoarders’ hands. In gold, over the last eight trading session 110.3 tonnes have been stood for delivery for a total so far this year of 1,014.5 tonnes. And in silver deliveries were 547.6 tonnes and 11,407 tonnes respectively.

In addition, ETF demand for gold is just beginning to put the squeeze on liquidity, as this graphic from the World Gold Council demonstrates:

The bars are weekly totals of net global ETF demand, with dark blue being North American ETFs. They don’t tell the whole story, because authorised participants sell short ETFs and deliver borrowed stock in exchange for bullion. For example, at end-September short interest in GLD stood at 11,890,650 shares or 3.42% of the outstanding. Note that this represents double ownership, compromising innocent holders, as well as suppressing apparent demand.

In currencies, the major development was the substantial decline in the Japanese yen, reflecting the election of Sanae Takaichi to head the ruling party and therefore will be the next prime minister. Ms Takaichi is expected to increase public spending to support business, and while the Nikkie soared on the news, the yen took a tumble:

Furthermore, the euro and sterling appear to be losing upside momentum against the dollar, which suggests that the dollar’s trade weighted index might turn higher, perhaps to challenge the 250-day moving average currently at 102:

This reflects a fiat currency race to the bottom. But for now, the liquidity squeeze dominates gold and silver markets, with silver appearing to be rising on steroids. 

We end this report with the gold/silver ratio chart, which points towards significantly lower levels — i.e., silver will continue to outperform gold, potentially dramatically.