Silver rally resumes, but TD warns that increased supply makes the market vulnerable

NEW YORK (November 11) After holding critical near-term support above $48 an ounce, silver has attracted new bullish momentum, with prices rallying back above $50 an ounce.

Some analysts have said that silver has found its mojo after being officially added to the U.S. Geological Survey (USGS) 2025 List of Critical Minerals. They note that this could boost silver’s industrial consumption, which, in turn, may continue to disrupt the precious metal’s global supply chain and create tighter physical markets.

Silver prices rallied to a record high of $54.48 an ounce last month as growing physical demand depleted above-ground stocks in London. At the same time, bullion banks in the U.S. are reluctant to release their silver holdings due to the potential for new tariffs stemming from the metal’s critical mineral status.

While a shortage of physical metal in specific markets pushed prices higher last month, Daniel Ghali, Senior Commodity Strategist at TD Securities, warned investors that the precious metal remains vulnerable to a further correction as supply chain constraints have eased.

Citing inventory data from the London Bullion Market Association, Ghali said he estimates that 198 million ounces of silver are available in London vaults.

“That reflects an epic 111 million ounces added to the free float only ~2 weeks after the historic #silversqueeze,” he said.

While the precious metal, chasing higher premiums, has flowed in from other markets like New York and China, Ghali added that some of it appears to have come from increased recycling.

“The #silverflood may have been exacerbated by more than a simple reshuffling. Our estimates of free-floating inventories as of October point to metal returning to the system from other sources than can be explained by withdrawals from COMEX, SHFE, and ETF holdings alone. Private vaults and scrap may have contributed at least ~30% of the monthly repletion in the LBMA's free float,” he said.

While silver’s latest market squeeze may be over, Ghali said that overall market conditions haven’t changed.

“The next one will necessitate (1) a more significant erosion of inventories in Shanghai and New York, or (2) forms of export controls that could inhibit rebalancing mechanisms, including Section 232 tariffs or more stringent export controls in China,” he said.

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