New Year’s Day – 2026. I opened Quicken and tallied the final 2025 numbers; we had a terrific year! Soaring precious metals prices were the main contributor.

The silver surprise…. Last year we celebrated a 21% increase. In 2025 the price surged 150%. (Graph courtesy of Bullionstar)
 

I took a deep breath; too much, too fast. Euphoria, confusion, uncharted waters – terrific gains with little confidence in understanding what happened and why. Pundit explanations are all over the map. I’d finish an article and say, “Yeah, that makes sense – but…”

My reason for holding silver (and gold) has been consistent since the 2008 bank bailout; high inflation is inevitable! Metal prices skyrocket while inflation cools???

Blindsided?

Dictionary.com defines blindsided, “Attacked critically or taken by surprise where one is vulnerable, uninformed or unprepared, etc.” Wow! That hit home. We don’t want to get blindsided and lose those hefty gains….

Questions Galore!

What caused the rise? Will it continue? Is this a small part of something bigger going on? Buy/sell/hold?

We will look at several factors independently, however, it may be a combination of several causing the sudden change.

Implementation of Basel III. Chuck Butler writes (While they discuss gold, the same applies to silver.):

“London metals trader Andrew Maguire…says major participants in the gold market no longer consider the New York Commodities Exchange and the London Bullion Market Association dependable for delivering real metal and are taking their business to Asian exchanges where delivery is quick.

…. He believes that ‘paper’ gold will be finished when the December gold futures contract closes at the end of November and U.S. bullion banks become obliged to comply with Basel III rules and stop selling metal they don’t have.”

Equifund adds:

“Amongst all the controversy surrounding Basel III, it is the potential impact on allocated/unallocated gold that I find most interesting.

• Allocated gold is all gold held in custody – off balance sheet – that belongs to the depositors.
• Unallocated gold – often referred to as paper gold – is attractive to banks because they can leverage on the gold actually held in the vaults, and some estimates put the ratio of unallocated gold to physical gold at up to 400 times, making it potentially very profitable to bullion banks.

Under the new rules, banks are required to hold physical gold or other liquid assets for an amount equal to at least 85% of the value of unallocated gold on their books.

A likely, and probably intended, consequence of the Basel III rules will be a drop in the volume of financial transactions linked to gold.”

Chuck’s summary:

“Basil III calls for an end to selling metals that you don’t have; if you sell them, you must be able to deliver quickly. This would be a dagger in the heart of the short paper traders who manipulate the metals almost daily…

Think about this. How many investors holding “unallocated gold” might find that who knows how many other investors also have a claim to the same gold? When the music stops, it could get ugly!”

Loss of Faith in USD. Biznews reports:

“China, India, and Russia are buying unprecedented amounts of silver, causing global prices to hit new records daily. 

This shift in the global power balance is driven by declining trust in the US dollar ….”

While China and others would welcome a USD collapse, they have much to lose if it happens. They hold billions in treasury bonds which would also become worthless. Much like individual investors they are diversifying, hedging against the inevitable inflation of the USD.

China is flexing their muscles over the silver market. MarketWatch reports:

“China controls around 70% of the silver that Big Tech, AI and solar power desperately need. Beijing is locking the gates.

…. On Jan. 1, China’s new export-licensing regime took effect, putting government gatekeepers between 121 million ounces of annual silver exports and the rest of the world. That means 60%-70% of the globally traded refined supply will require Beijing’s permission to leave the country.

…. China just weaponized silver.”

Silver Supply Squeeze. Bullionstar tells us:

“…. The silver market is capturing global attention like never before. …. What investors are now witnessing is not a typical cyclical rally, but what increasingly resembles a fundamental repricing of silver.

…. Physical silver pricing on the Shanghai Gold Exchange has decisively broken away from Western paper benchmarks, with premiums reaching approximately 12 to 13 percent above LBMA spot and COMEX futures prices.

…. These premiums are the natural consequence of a market where physical supply is constrained and paper prices fail to clear real-world demand.

…. The physical squeeze in silver is underpinned by years of structural deficits. Global mine production peaked around 2016 and has since declined, while demand has continued to rise. With roughly 70 percent of silver produced as a byproduct of base metal mining, higher prices alone cannot quickly bring new supply online.”

It’s no surprise the US government recently named silver a strategically critical metal….

Market manipulators. (2023) Ted Butler explains:

“After 40 years of silver price manipulation and suppression on the COMEX, the physical market has experienced a lack of production growth and enhanced demand brought about by too-low silver prices. According to the immutable law of supply and demand, silver is now in a deepening physical shortage in which sharply higher prices are both required and inevitable. The key element…is the likely behavior of the short sellers of silver derivatives.”

Ted’s numbers are mind-boggling:

“That would bring the total COMEX futures and call options short exposure to …. 675 million ounces.

…. For every dollar increase in the price of silver, the longs would make $675 million and those short would lose $675 million. …. A $10 increase would amount to a collective gain and loss of $6.75 billion. Should the price of silver increase much more than that, as I believe, the math is astounding for collective gains and losses. The short-sellers of silver would face a cataclysmic financial setback.”

Ted explains the short sellers would be faced with billions in margin calls with little time to react, driving prices even higher. He concludes:

“One of the unintended consequences of the 40-year COMEX silver manipulation and the failure of the regulators to end the manipulation earlier, is that it has lulled those short into believing the current price is somehow normal.

However, just as there is no force more powerful on the price of a commodity than a physical shortage, there is no force more powerful in the world of derivatives than a short-covering panic. The impact on price brought about by an inevitable short covering buying panic in silver promises to be epic.”

What caused the huge price spike in silver?

Take your pick! I believe it is a combination of all of the above.

For decades experts like Ed Steer and Ted Butler have warned about unregulated market manipulation; paper traders controlling the price of precious metals. Has the inevitable finally become imminent?

Artificially low prices offer no incentive for miners to explore. Why spend money today when you may not see an adequate return for decades? There will be no quick turnaround increasing supply.

Today’s concern? What to do now?

We want to protect our newfound wealth and not get blindsided by another “Silver Thursday.”

“On March 27, 1980—a date that became known as ‘Silver Thursday’—the Hunt brothers finally missed a margin call and the market plunged; silver led the way, dropping to under $11 from its high of $50.42.”

How many of the five factors will quickly go away? Basel III, China, USD inflation, and supply squeeze?

It looks like market pricing is moving from the price manipulation of the paper traders to free market supply/demand pricing – with the Chinese having a major impact on available supply.

Not everyone agrees….

Choices

Kitco reports:

“TDS takes another swing at shorting silver, looking for a drop to $40 in the next three months.”

Adam Sharp opines:

“The outlook for silver and miners remains bright.

…. We are due for a pullback. It would be healthy if we corrected a bit more, or at least consolidated around the $70 level for a while.

…. We could spike to $100+, and I don’t want to miss that move when it happens. So, I’ll continue to hold long-term.”

Buy, sell or hold? Take your pick. Shorting is for traders with deep pockets, stay away from funds, ETFs and any instrument playing those games.

I’m not selling our physical holdings; that is our inflation “insurance.”

Silver mining and royalty stocks have taken off. Increasing silver prices have a significant impact on their profit and stock price. There are risks. Mines can have accidents, government takeovers, unexpected catastrophes.

A single stock worth a major portion of your portfolio is also risky. Taking profits and reinvesting in other stocks in the same sector provides the same exposure to metals with additional diversification.

If a surprise happens, keep the damage to a minimum. The paper trader/price manipulators won’t give up easy. 2026 is going to be a wild ride for metals! I don’t expect gains like 2025, but I’m not anticipating a “Silver Thursday” either. It’s time to implement some stop loss alerts…
 

On The Lighter Side…

The first week in January produced some Chamber of Commerce weather here in central Florida. Jo and I hopped in the golf cart and did some exploring. There is so much more to see and do. The days have been very busy with unpacking; I look forward to having pictures hung and no more boxes to unpack.

Is it me, or have recent football games been really exciting? Lots of college and NFL games have gone down to the last minute before determining the outcome. There were some times over the weekend where I felt we were watching non-stop commercials, occasionally interrupted for a few minutes of football. I understand the needs for sponsorship but geesh!

The Bears 25-point comeback in the 4th quarter against the Packers was something that will be talked about for years. For their last four games, the outcome was not known until the clock expired – that is exciting.

Pulling for Indiana to complete their miracle year on Monday night. What a magical, Cinderella season it would be if they win the big prize.
 

Quote of the Week…

“Specie (gold and silver coin) is the most perfect medium because it will preserve its own level; because, having intrinsic and universal value, it can never die on our hands, and it is the surest resource of reliance in time of war.”

—Thomas Jefferson
 

And Finally…

Let’s close out the week with some more New Year’s resolutions/puns, courtesy of my wife Jo. I hereby resolve:

• To learn how to pick locks. It should open doors for me in 2026.
• To sell my parakeet that lost its voice last year. Serious inquiries only – it’s not going cheap.
• To stop spreading nasty office gossip in the elevator. That’s being mean on so many levels.
• To visit a nude beach, as soon as I overcome being clothes-minded.
• To give away my old broken garden gate. No, there’s no catch.
• To dress up as a clown and entertain the neighborhood children for their birthdays. They will appreciate the jester.
• To learn sign language. It will be very handy.

And my favorite:

• To relearn how to throw a boomerang. Hopefully, it will come back to me.

Until next time…

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