Silver (XAG) Markets Remain in Structural Deficit as Lease Rates Climb Above 5%

Silver is experiencing continued structural deficit conditions while gold shows idiosyncratic strength, pushing the XAU/XAG ratio higher according to market analysis.

Silver (XAG) Squeeze End-Game Approaching Final Months

We are witnessing what appears to be the final phase of the silver squeeze, according to TDS' Senior Commodity Strategist Daniel Ghali. Historical patterns suggest significant price movement potential ahead. The last time Silver prices managed to break through the $35/oz threshold in a sustainable manner, it took less than six weeks for prices to approach the $50/oz mark. This rapid price acceleration demonstrates the potential for swift movements in the silver market when key resistance levels are breached.

XAU/XAG Ratio Reflects Gold's Strength Rather Than Silver (XAG) Weakness

The increasing XAU/XAG ratio isn't indicative of underlying weakness in silver markets, analysts note. Instead, it reflects particularly strong performance in the gold sector. This distinction is important for investors attempting to interpret market signals, as it suggests that silver fundamentals remain solid despite the comparative ratio movements against gold.

Silver (XAG) Market Conditions Point to "Substantial Upside Convexity"

Several key indicators point to potential upward price movement for silver in the near future. Lease rates continue to climb north of 5%, indicating tightness in physical markets. Meanwhile, discretionary traders remain underpositioned, suggesting potential buying pressure once positioning adjusts. These factors combine with the ongoing structural deficit in silver markets to create conditions ripe for price appreciation.

Liquidity Scarcity Could Amplify Silver (XAG) Price Movements

"In the current context in which liquidity is critically scarce, we expect the end-game to result in substantial upside convexity in flat prices," according to market analysis. This liquidity constraint could magnify price movements when the anticipated buying impulse materializes. For silver investors, this liquidity factor adds another dimension to the market dynamics currently at play.

Next Silver (XAG) Buying Impulse "Only a Matter of Time"

Market observers believe the next significant buying impulse for silver is inevitable given the current market conditions. The combination of scarce liquidity, rising lease rates, structural deficits, and underpositioned traders creates a environment where price discovery could accelerate rapidly once buying momentum returns to the market. The timing remains uncertain, but analysts suggest the conditions for such a move are already in place.

The ongoing structural deficit in silver markets remains one of the most compelling fundamental factors supporting the bullish case. Despite price fluctuations, this supply-demand imbalance continues to underpin the long-term outlook for silver as both an industrial metal and a monetary asset. As global industrial demand for silver continues in sectors like renewable energy, electronics, and medical applications, this deficit situation may become increasingly significant for price formation.

With lease rates exceeding 5%, the cost of borrowing physical silver has reached levels that typically indicate significant tightness in available supply. This metric serves as another confirmation of the structural challenges facing the silver market and supports the thesis that price discovery may accelerate when sufficient buying interest returns to the market.