Gold Cements Historic 66% Gain as Silver Supply Crunch Looms for 2026

The precious metals complex has concluded a blockbuster year, with Gold (XAU/USD) delivering its best performance in 46 years, rallying 66% in 2025. However, while the yellow metal grabs headlines, sophisticated investors are turning their gaze to a potential “force majeure” event brewing in the Silver market.

The Silver Squeeze Thesis

Silver prices are trading with extreme volatility, having surged over 150% year-to-date to test the $78/oz level. Analysts at SilverStockInvestor warn that the metallic aspect of Silver—its critical role in solar panels, AI hardware, and electronics—is colliding with a structural deficit.

Key risks for 2026 include:

1. Inventory Depletion: Stockpiles in Shanghai are at 10-year lows, and London vaults report tight liquidity. The global movement of physical silver has become a “shell game,” shifting between hubs without actual inventory growth.

2. Industrial “Force Majeure”: There is a growing probability that a major industrial user may demand physical delivery that exchanges cannot fulfill, potentially triggering a cash-settlement crisis that would send premiums soaring.

3. The Gold/Silver Ratio: Even with recent gains, the Gold/Silver ratio remains historically elevated. A mean reversion suggests Silver has significant runway, potentially targeting $125/oz if Gold holds above $4,000.

Gold's Monetary Premium

Golds ascent is driven by a different engine: the debasement of fiat currency and central bank accumulation. The 2025 rally was fueled by the “Trump 2.0” dollar devaluation and relentless buying from non-Western central banks diversifying away from USD assets.

Despite a year-end pullback driven by profit-taking and a bounce in US yields, the fundamental thesis for Gold remains intact. The disconnect between fiscal dominance (high deficits) and monetary policy implies real rates may remain suppressed, a classic bullish setup for non-yielding assets.

Trader View: The dip in XAU/USD is viewed by macro funds as a consolidation within a super-cycle. Watch for support levels near $4,300 to hold; a breach below could signal a deeper correction, but the long-term trend favors the bulls.