Bank of America now sees $65 silver, as price spike reduces London market to a ‘state of seizure.’

Core Viewpoint - The silver market is experiencing a significant rally, with prices expected to continue rising due to a physical supply shortage and high demand, leading to potential dysfunction in trading markets [1][5]. Price Movement - Silver prices have surged past $50 per ounce, reaching approximately $51.50, with Comex silver futures climbing 5% to $49.71, indicating a strong upward trend [3]. Market Outlook - Bank of America has set a bullish price target of $65 per ounce for silver by 2026, despite anticipating a possible short-term correction and an 11% decline in physical demand [2]. - Analysts predict a physical deficit in silver, which supports expectations of a 30% price rally [2]. Supply and Demand Dynamics - The current physical demand for silver exceeds supply, with borrowing rates for silver surpassing 100%, necessitating higher prices to balance the market [4]. - The London Bullion Market Association is facing severe operational challenges due to insufficient physical silver to meet the demand from spot contracts, leading to market dysfunction [5]. Inventory Issues - The London silver cash market is under pronounced stress due to a significant decline in available inventories, which have dropped by one-third since 2021 [7]. - There is a notable premium for London silver spot prices over Comex futures, reflecting the physical shortage in the market [7].