Silver (XAG) Forecast: Short Squeeze Fuels Rally — But Is It Time to Buy Value Instead?

Traders Confront a Record-Breaking Market With Caution

Spot silver (XAG/USD) rallied to $53.27 in early Wednesday trading, continuing its steep year-to-date climb of nearly 75% and far outpacing gold’s 60% gain. However, prices remained below Tuesday’s peak at $53.62 — the highest level since 1980 — forming an “inside day” that reflects trader hesitation at elevated levels.

Despite the sharp rally in recent sessions, the inability to extend beyond Tuesday’s high highlights growing caution. With RSI readings signaling overbought conditions and no clear technical resistance levels beyond psychological round numbers, traders remain divided on whether to buy strength or wait for deeper value.

At 12:15 GMT, XAG/USD is trading $52.93, up $1.45 or +2.82%.

Supply Squeeze and Short Squeeze Accelerate the Rally

A key driver behind silver’s explosive move has been a tightening physical supply. London’s silver inventories have dropped to multi-year lows relative to New York, intensifying fears of scarcity. This has triggered a powerful short squeeze, as bearish traders were forced to cover positions or pay escalating borrowing costs to rent physical silver.

These supply pressures have added fuel to the rally, catching many off guard. The aggressive price climb, with few identifiable resistance levels beyond psychological round numbers like $55.00 or $60.00, has made it difficult for traders to define upside targets, reinforcing a FOMO-driven environment.

Safe-Haven Demand Grows on Trade and Policy Uncertainty

Geopolitical risk is adding further momentum. President Trump’s latest tariff package—a 100% levy on all Chinese imports effective November 1—has amplified concerns about a global slowdown. The ongoing U.S. government shutdown, combined with expectations for imminent Federal Reserve rate cuts, is boosting precious metals demand as investors seek protection against policy and economic instability.

Traders Split: Buy Strength or Wait for Value?

As silver trades within an “inside” range below $53.62, many traders are pausing to reassess risk. Some are hunting value after the parabolic rise, while others are staying out due to fears of a blow-off top. There’s broad agreement that exit strategy—where a trade is invalidated—matters more now than chasing an undefined upside.

Short-Term Forecast: Bullish With Caution

While silver remains in a strong uptrend, stretched sentiment and volatile price action suggest a temporary cooling phase is likely. Unless prices break above $53.62 with conviction, traders may continue to favor selective buying on pullbacks. The medium-term outlook stays bullish, but upside momentum could stall unless supported by fresh headlines or a broader market correction in the dollar or equities.

More Information in our Economic Calendar.