Goldman Sachs(US:GS) Shang Hai Zheng Quan Bao·2025-10-13 18:20Core Viewpoint - The tightening liquidity in the London market has led to a historic surge in silver prices, with spot silver reaching a record high of $51.714 per ounce on October 13, marking a daily increase of over 3% [1][2]. Group 1: Market Dynamics - The London silver market, being the largest for physical silver trading globally, has seen its inventory decline by one-third since mid-2021, with only 200 million ounces remaining, a 75% drop from over 850 million ounces in mid-2019 [2]. - The current supply-demand imbalance is exacerbated by rising industrial and investment demand, particularly from the photovoltaic industry and increasing ETF absorption, which has led to a significant price increase of over 77% in spot silver this year [3][6]. - The implied leasing rate for January silver has surged to 42.72%, indicating tightness in the physical silver market and triggering a rare short squeeze [1][3]. Group 2: Investment Trends - The total holdings of major overseas silver ETFs have increased by 12.8% from 24,957 tons on February 6 to 28,162 tons by October 10, further tightening the available supply in the market [3]. - The relationship between spot and futures prices has become misaligned, with the premium of London silver over the nearest NY silver futures contract reaching $2.31 per ounce, a high not seen in recent years [5]. Group 3: Future Outlook - Analysts suggest that the current short squeeze and liquidity tightening are temporary phenomena, with expectations of a gradual restoration of liquidity as higher prices attract silver back to the London market [6]. - However, the short-term volatility and downside risks for silver are expected to be significantly higher than for gold, due to the smaller market size and relative illiquidity of silver compared to gold [7].