Silver 2026: Fact-Checking the Squeeze – Mines, Myths, and Markets

Ernesto Keaney CRPS®, RFC®Chairman & CEO | December 31, 2025

"Navigating the Collision of Structural Deficits and Speculative Mania"

The silver market concluded 2025 with extraordinary volatility, trading in a chaotic range from ~$30/oz to brief highs exceeding $80/oz before settling near $72/oz. This ~150% intra-year move has generated a polarized landscape where verifiable industrial shortages collide with unverified retail speculation [9][10]. As speculators move in, we expect continued high volatility as the market seeks real price discovery. Based on our technical analysis, we see a possibility of a 40%+ correction in the short term; however, this does not alter the structural reasons for our long-term positioning.

This commentary outlines the data currently driving allocations within KFSC Risk Managed Strategies and the signals generated by our proprietary KFSC Macro Regime Model. We share this detailed analysis to educate clients on how we distinguish between verifiable industrial data (the signal) and speculative conspiracy theories (the noise) when constructing risk-managed portfolios.

I. Historical Context: The Post-1971 Paradigm & The Great Liquidation

THE RUMOR: The U.S. Government maintains a secret "strategic stockpile" of silver that it can release onto the market to suppress prices if they become too high.

THE FACT: The U.S. government sold off its strategic reserves decades ago. The "safety net" is gone.

To understand the 2026 signals in our KFSC Macro Regime Model, it is critical to recognize that silver cannot be analyzed using pre-1971 frameworks, specifically due to the loss of government buffers.

The Great Liquidation (1960s - Verifiable Fact): Analyst chatter and internet news often discuss the rumor that the U.S. "sold off" its strategic reserves. This is true and verifiable. In the late 1950s, the U.S. Treasury held over 2 billion ounces of silver. Throughout the 1960s, the government sold this massive stockpile to suppress prices and maintain the $1.29/oz peg. By 1970, this inventory was effectively zero [11].

The Consequence: Today, unlike the 1960s, there is no government "strategic reserve" to dump into the market to cool prices. We are operating without a safety net.

The 1971 Pivot: Prior to President Nixon ending the direct convertibility of the U.S. dollar to gold on August 15, 1971, silver functioned primarily as a subsidiary monetary unit [12]. Its price was often anchored by government policy or fixed exchange ratios, suppressing natural volatility.

The Modern "Hybrid" Asset: In the post-1971 era, silver evolved into a free-floating asset with a complex "dual identity." It acts as a monetary hedge during periods of currency debasement (reacting to M2 money supply expansion like gold) and as a cyclical industrial commodity during economic expansions (tracking copper and manufacturing PMIs).

II. The Market Facts: Verifiable Supply Constraints

Our Macro Regime Model currently identifies a persistent structural deficit as the primary driver of our long positions. This is supported by verifiable regulatory and operational challenges, particularly in Mexico, which has historically provided nearly a quarter of the world's silver.

1. The "Mine Closure" Reality: Stagnation, Not Collapse

THE RUMOR: Mexico has "nationalized" silver mining and shut down all operations, causing an immediate global supply shock.

THE FACT: Mexico has frozen new permits, creating a slow-motion depletion crisis ("death by a thousand cuts"), but existing major mines remain open and operational.

To clarify the situation in Mexico for our clients, we must distinguish between the sensational headlines and the operational reality.

The Regulatory Freeze: The May 2023 reforms to Mexico’s Mining Law ("Mining Law Reform") fundamentally altered the investment landscape. By reducing concession terms from 50 to 30 years, the law drastically shortened the ROI (Return on Investment) horizon for capital-intensive projects. Furthermore, the restriction on open-pit permits in "water-scarce regions", which encompasses much of the silver-rich north, has effectively frozen new project approvals [1]. The law conditions new concessions on water availability, creating a legal bottleneck that has halted exploration activity [2].

Operational Divergence (Late 2025 Status):

Struggling Assets (The Depleted): Older mines, such as Fortuna Mining’s San Jose (operating under legal injunctions) [3] and Bear Creek’s Mercedes (facing funding deficits) [4], are struggling because they are running out of ore and cannot easily expand due to new laws. Guanajuato Silver’s Bolanitos Mine also experienced production declines due to the aging of its veins [5][6].

Resilient Assets (The Efficient): Conversely, First Majestic’s San Dimas Mine remains a bright spot, reporting consistent production increases (up ~17% in mid-2025 trends). San Dimas benefits from being a high-grade, underground operation with established infrastructure, shielding it from the "open pit" bans affecting competitors [7].

The Takeaway: The industry is not collapsing globally, but the replacement pipeline is broken. As aging mines like Mercedes and Bolanitos fade, regulatory barriers prevent new projects from coming online to replace them, ensuring supply remains inelastic to rising prices.

2. Persistent Physical Deficits

THE RUMOR: Higher prices will immediately unlock massive amounts of previously hidden supply, flooding the market and driving the price down.

THE FACT: Supply is unresponsive due to the permit freezes mentioned above, while demand is price-inelastic because the solar industry cannot easily substitute silver.

According to the Silver Institute, 2025 marked the fifth consecutive year where global demand exceeded supply [8]. This is not a temporary anomaly but a structural shift.

Industrial Demand: Photovoltaic (solar) demand hit record highs in 2025, accelerated by the adoption of TOPCon and HJT solar cells, which require significantly more silver paste than older technologies. This demand is largely price-inelastic because silver represents a small fraction of the total cost of a solar panel, but it is essential for efficiency. Manufacturers will pay the prevailing spot price rather than halt production.

Inventory Drawdowns: To meet this deficit, the market has been cannibalizing existing stocks. Above-ground stockpiles in London and New York vaults have been drawn down by an estimated 820 million ounces since 2021 [8]. Once these accessible stockpiles are depleted, the market loses its buffer against supply shocks.

III. The Market Rumors: Deep Dive on Institutional & Geopolitical Positioning

While KFSC models prioritize industrial data, we track the "Street Narrative" to gauge sentiment and potential capitulation risks. The current speculation has expanded from banking theories to geopolitical alliances.

1. China: The Export Ban Rumor

THE RUMOR: China is preparing to ban silver exports to strangle Western solar manufacturers, similar to their restrictions on other critical minerals.

THE FACT: China is a net importer of silver, not a major exporter of raw metal. The rumor conflates silver with the verified export controls China placed on Gallium, Germanium, and Antimony.

The Geopolitical Context: Viral reports suggest China will restrict silver exports to reserve resources for its domestic energy transition.
The Jan 1, 2026 Catalyst (VAT Rebate Removal): The specific "change" anticipated for January 1, 2026, is likely the removal of the 13% Value Added Tax (VAT) rebate on exports of silver semi-manufactured products (like silver paste or wire). China implemented similar rebate removals for copper and aluminum in late 2024 to discourage the export of energy-intensive resources.
- Relation to Rumor: While not a "ban," removing this rebate effectively makes Chinese silver products 13% more expensive for international buyers. This incentivizes domestic producers to sell locally to Chinese solar manufacturers, tightening global supply without a formal prohibition.
The 2026 Industrial Catalyst (TOPCon Dominance): Beyond taxes, 2026 marks the industrial tipping point where Chinese manufacturers fully transition from PERC to TOPCon (Tunnel Oxide Passivated Contact) solar cells.
- Why it matters: TOPCon cells utilize 50-80% more silver per unit than previous generations. This verifiable surge in domestic "burn rate" explains why Beijing is using fiscal policy (VAT changes) to keep silver inside its borders; they need every ounce for their own energy infrastructure, supporting the "tightness" narrative without requiring a conspiratorial ban [13].
The Verification (Unlikely Policy): Since China consumes far more silver than it mines (to feed its 80%+ global market share in solar panel manufacturing), it relies on imports [13]. Blocking exports of raw silver would be redundant. The real risk is a restriction on the export of solar technology or silver paste, but no such ban currently exists. This rumor gains traction because China did restrict exports of Gallium and Germanium in 2023, setting a precedent for weaponizing supply chains [23].

2. Russia: The BRICS Currency Rumor

THE RUMOR: Russia is aggressively stockpiling silver to back a new BRICS trade currency, coordinating with other nations to corner the market.

THE FACT: While Russia creates strategic stockpiles, central bank reserves are overwhelmingly focused on gold, not silver.

The Geopolitical Context: Speculation abounds that the BRICS bloc (Brazil, Russia, India, China, South Africa) is launching a metals-backed currency to rival the U.S. Dollar.
The Verification: There is no official BRICS framework proposing a silver-backed currency. Silver's high volatility makes it a poor primary anchor for a new currency compared to gold. The "Axis of Silver" narrative is largely a speculative theory that extrapolates Russia's general strategy of de-dollarization into a specific, unverified plan for accumulating silver.

3. Mexico: The Nationalization Rumor

THE RUMOR: Mexico will nationalize silver exports or ban them entirely to retain value within the country.

THE FACT: Mexico nationalized Lithium in 2022. Silver remains private, though new permits are frozen.

The Geopolitical Context: Following the nationalization of lithium, rumors persist that Mexico may nationalize silver exports.

The Verification (Partially True / Context Required): Mexico has not banned silver exports. While the political climate is hostile to foreign mining (as seen in the permit freezes), an outright export ban would cripple their own economy. The "nationalization" narrative conflates silver with the specific 2022 Decree regarding the Nationalization of Lithium [14]. This remains a "tail risk" rumor, not current policy.

4. The Bear Stearns Inheritance & The "Flip."

THE RUMOR: JPMorgan has secretly accumulated 750 million ounces of physical silver and will drive the price to the moon to profit from a squeeze.

THE FACT: U.S. Banks have indeed shifted "Net Long" in paper markets, but there is no regulatory evidence of a massive physical hoard [9].

The Historical Fact (March 2008): In the heat of the Global Financial Crisis, JPMorgan acquired Bear Stearns at the behest of the New York Fed [15]. Buried in Bear Stearns' books was a massive, concentrated short position in COMEX silver and gold derivatives.

Why it matters: This position was so large that unwinding it immediately could have crashed the derivatives exchange. JPM became the unwilling owner of the largest short position in market history.

The "Suppression & Accumulation" Theory:

The Narrative: Critics (often citing the Gold Anti-Trust Action Committee, or GATA, an advocacy group dedicated to exposing alleged price suppression) allege JPM used its dominant market share to suppress paper prices for a decade (2011-2020), allowing them to cover the inherited short cheaply while simultaneously accumulating a massive physical long position.

The Substantiation (The $920M Fine): This narrative was heavily reinforced in September 2020, when JPMorgan admitted to wrongdoing and agreed to pay $920 million to settle probes by the U.S. Department of Justice (DOJ) and the Commodity Futures Trading Commission (CFTC) into "spoofing" (placing orders with the intent to cancel them) in precious metals markets [16]. This record fine provided the "smoking gun" for analysts claiming price manipulation, confirming that traders had manipulated prices for years, which fueled the broader accumulation theory.

The 2025 "Flip": The current rumor circulating in 2025 is that JPM has "flipped the switch"—moving from a paper short to a physical long (allegedly 750M - 1B oz) to profit from the squeeze they arguably created.

The Verification: UNVERIFIED / MIXED.

Futures Data: CFTC reports [9] confirm that U.S. banks shifted to a Net Long Position in 2025. Specifically, the Bank Participation Report, which aggregates the total positions of all U.S. Banks. In late 2025, for the first time in years, the aggregate "Long" contracts held by this sector exceeded their "Short" contracts. This statistically confirms the sector has flipped, but because the data is anonymized and aggregated, it does not reveal specific bank holdings. While we can see that "U.S. Banks" as a group flipped to a net long position in late 2025, it is impossible to know from this report if that shift was driven by JPMorgan, Bank of America, or a combination of smaller banks.

Physical Data: There is no regulatory evidence of a 750M oz proprietary physical hoard. While JPM's COMEX vaults often hold significant "Eligible" silver (metal stored for customers), this should not be confused with "Registered" or proprietary metal owned by the bank itself [17]. Verification capabilities differ significantly by client type:

SLV Holdings (Verifiable): The iShares Silver Trust publishes a daily "Bar List" identifying the serial number, weight, and refiner of every bar held by JPMorgan as custodian [18]. This creates a high degree of transparency for ETF assets.

Private/Individual Holdings (Unverifiable): Holdings for private clients, family offices, or unallocated accounts are protected by privacy mandates, such as the Gramm-Leach-Bliley Act [19]. Furthermore, physical precious metals are not classified as "Section 13(f) securities" by the SEC, meaning wealth managers are under no legal obligation to publicly disclose these specific assets [20]. This regulatory "black box" is verifiable only to the client, creating the opacity where rumors of "secret hoards" thrive.

5. The SLV Custodian Controversy

THE RUMOR: The silver in the SLV ETF does not exist or has been leased out (rehypothecated) multiple times.

THE FACT: Independent audits confirm the existence of the bars, but the ETF structure allows for temporary "unallocated" holdings, which creates credit risk concerns.

The Rumor: Speculation that the silver backing the iShares Silver Trust (SLV) is "rehypothecated" (leased out multiple times) by custodian JPMorgan. This stems from the ETF's prospectus, which allows for the temporary use of "unallocated accounts" where the custodian faces credit risk, though the trust mandates that metal be allocated to specific bars at the end of each day [21].

The Implication: A loss of faith in "paper silver" (ETFs) is driving a surge in demand for physical metal. While independent audits verify the existence of the bars, this narrative continues to drive retail premiums for physical coins to historically high levels compared to the spot price [22].

IV. 2026 Price Implications & KFSC Risk Managed Portfolios Positioning

THE RUMOR: Retail consensus has silver speculated to hit $100/oz in 2026 due to a "short squeeze."

THE FACT: Institutional models project a mean reversion to approximately $58/oz, creating a significant gap between retail hype and banking forecasts.

The divergence between institutional forecasts and retail sentiment creates a potential volatility trap for 2026.

Source	2026 Forecast / Target	Rationale
J.P. Morgan Global Research	~$56 - $58 / oz	Expects mean reversion; views current price as disconnected from fundamentals [10].
BMO Capital Markets	~$60 / oz	Acknowledges deficits but remains cautious on industrial slowdown risks [10].
Retail Consensus	$100+ / oz	Driven by "short squeeze" theories and currency debasement fears [9].

KFSC Macro Regime Model Signals: Our internal model identifies the structural deficit [8] as a fundamental factor that provides potential price support, although this should not be viewed as a price floor. However, the model registers "Overheated" sentiment signals due to the speculative retail furor. We are observing extreme bullishness in retail call options, a classic contrarian signal that often precedes a market correction or decline.

Implications for KFSC Risk Managed Strategies: Based on this data, our strategies are positioned to capture the long-term industrial upside (solar/AI demand). We are expecting short-term mean reversion; however, we accept this volatility as we hold for the structural pillars and long-term opportunity. We manage downside risk by limiting overall exposure, while maintaining an overweight allocation relative to the typical silver positioning.

Strategic Focus: We are not positioning for a supposed or rumored "banking collapse squeeze" but rather for a sustained industrial crunch. We view silver as the strategic energy metal of the 21st century. Just as oil fueled the global economy over the last 100 years, silver is required to fuel the future, it is the indispensable conductor for the green and digital transitions (Solar, EVs, AI, 5G).

Instrument Selection: We favor unleveraged physical trusts that are fully allocated and have redemption rights.

Portfolio Stance: We prioritize exposure to verifiable supply constraints over leveraged bets on unverified bank rumors. The goal is to survive the volatility to participate in the long-term repricing of the metal.

V. Silver Risk Disclosure: The Historical Volatility Reality

While physical silver differs from equities in that the underlying asset cannot go "out of business" or declare bankruptcy, it carries a unique risk profile characterized by extreme historical volatility.

The >90% Drawdown Reality: Investors must be aware that silver has experienced catastrophic drawdowns in the past. Following the Hunt Brothers' peak in January 1980 (~$50/oz), silver prices collapsed by over 90% in the subsequent years, languishing near $3.50-$4.00/oz by the early 1990s [11].

Implication: This demonstrates that while the metal retains intrinsic value, that value can compress significantly and remain depressed for extended cycles. We manage this risk through strict position sizing, while maintaining an overweight allocation relative to our normal silver positioning. By utilizing long-term pricing outlooks rather than short-term speculative targets, our model tracks the fundamental pillars required to maintain the position; if these long-term pillars change, we adapt the portfolio accordingly, reflecting our dynamic management approach. We also acknowledge that "cheap" can always get cheaper in a liquidation event.

References

Jones Day. (2023, June). Mining Reform in Mexico: Amendments and Impact.
Baker McKenzie. (2023, May 8). Mexico: The 2023 Mining Law Reform.
Fortuna Mining. (2024, March 11). Fortuna Silver Anticipates Closure of San Jose Mine. Mexico Business News.
Bear Creek Mining. (2025, November 11). Bear Creek Mining Reports Q3 2025 Financial and Operating Results. (TSXV: BCM).
Seeking Alpha. (2025, November 24). Endeavour Silver to sell Bolañitos mine in Mexico to Guanajuato Silver in $50M deal.
Guanajuato Silver. (2025, December 22). Guanajuato Silver Receives TSXV Conditional Approval for Bolanitos Acquisition. (TSXV: GSVR).
First Majestic Silver Corp. (2024, July). First Majestic Produces 5.3 Million AgEq Oz in Q2 2024.
The Silver Institute. (2024, November 12). Global Industrial Demand on Track for a New Record High in 2024. (Press Release).
Kavout. (2025, December 27). Gold and Silver Price Forecast 2026: Why Precious Metals Hit Record Highs.
IG International. (2025, December 27). Commodities outlook 2026: gold, silver & oil price forecasts.
U.S. Geological Survey. (2018). Silver: Historical Statistics for Mineral and Material Commodities in the United States.
Federal Reserve History. (2013, November 22). Nixon Ends Convertibility of U.S. Dollars to Gold and Announces Wage/Price Controls.
S&P Global Commodity Insights. (2025, October 15). China's solar sector drives record silver demand.
Official Gazette of the Federation (Mexico). (2022, April). Decree regarding the Nationalization of Lithium.
Federal Reserve Bank of New York. (2008, March 24). JPMorgan Chase & Co. to Acquire Bear Stearns. (Press Release).
U.S. Department of Justice. (2020, September 29). JPMorgan Chase & Co. Agrees to Pay $920 Million in Connection with Spoofing Schemes. (Office of Public Affairs).
CME Group. (2025). Silver Stocks - Eligible vs. Registered Definitions and Data.
iShares. (2025). iShares Silver Trust (SLV) - Daily Bar List.
Federal Trade Commission. (1999). Gramm-Leach-Bliley Act, 15 U.S.C. Subchapter I, Sec. 6801-6809.
U.S. Securities and Exchange Commission. (2025). Form 13F: Special Instructions for Institutional Investment Managers.
iShares Delaware Trust Sponsor LLC. (2024). iShares Silver Trust (SLV) Prospectus. U.S. Securities and Exchange Commission.
CoinWeek. (2025, August 12). Silver Eagle Premiums Remained Elevated in Q2 2025 Despite Spot Price Volatility.
Ministry of Commerce (China). (2023, July 3). Announcement on Export Control of Gallium and Germanium Related Items.

Important Disclosures

This commentary is for informational purposes only and should not be considered a recommendation to buy or sell any security or the provision of specific investment advice. The opinions and forecasts expressed are those of Keaney Financial Services Corp. as of the date of this commentary. They are subject to change at any time based on market and other conditions and may or may not come to pass. The KFSC Macro Regime Model is a proprietary tool. Its analysis is based on historical data; however, it in no way guarantees future results or provides a guarantee against loss. Past performance is not indicative of future results.

The KFSCIF Framework and KFSC Core Macro Regime Model are analytical tools used to support decision-making. They are not automated systems that predict the future or dictate trades. All portfolio decisions are made at the discretion of the advisor based on their human interpretation of the data.

Historical data (such as valuation metrics) is used to contextualize current risks but is not a guarantee of future market performance. "Structural" and "Cyclical" themes are analytical concepts, not guaranteed outcomes.

Investing in commodities involves increased risks, including political, economic, and currency instability, as well as rapid fluctuations, which can lead to significant volatility in an investor's holdings. Commodities may not be suitable for all investors.

While Gold is often viewed as a "safe haven" or store of value, this status does not imply immunity from price volatility. Unlike a business, gold cannot go "out of business" or default, but it is a commodity subject to market fluctuations and produces no income (dividends/interest). All investing involves risk, including the possible loss of principal. Although important, asset allocation, risk management, and diversification strategies do not guarantee the generation of profits or protection against losses. Please consult with your financial advisor to determine if the strategies discussed are suitable for your personal financial situation. Consult your qualified financial, legal, or tax advisor before making investment decisions.

Important Disclosure: This commentary is not intended as investment advice for the general public. It is specifically tailored for clients invested in the KFSC Risk Managed Strategies only and does not apply to any other investments managed by the advisors at Keaney Financial Services Corp. outside of these specific models. Specific portfolio decisions depend on your individual risk tolerance and financial goals.

Research Disclosure
Our research and data may include contributions from paid, non-affiliated market experts, macroeconomic analysts, and economists. We have also incorporated multiple artificial intelligence (AI) platforms to assist us in researching, diagnosing, absorbing, analyzing, and illustrating data with greater efficiency. Because our management and strategies are data-driven, our goal is to utilize information that we believe to be accurate and validated across multiple sources, where possible. It is critical for clients to understand, however, that all data is subject to error and no amount of research or analysis can eliminate the inherent risks of investing or guarantee a specific outcome.