On Friday, silver surpassed $ 94 per ounce, creating another setup for a potential rally that could propel the market to unprecedented heights.
Several factors contributed to the recent rise, including a multi-year supply-and-demand imbalance, booming industrial demand (especially for EVs, AI, and solar), rising investment demand, and increased geopolitical risks. I believe the recent price surge does not account for two emerging developments that could trigger a supply-and-demand crisis.
China, the world's largest consumer of silver, plays a crucial role in driving global demand for the metal. Following the Lunar New Year, there has been a significant uptick in restocking efforts for both silver and copper. China is proactively securing its supply chains, hedging against inflation and currency fluctuations, while simultaneously supporting its leading manufacturing sector, particularly in electric vehicles and renewable energy. The strategic buildup in China reflects fears of potential supply shortages and ongoing trade tensions, prompting the country to treat precious metals, such as silver, as vital assets. With measures such as export restrictions and stockpiling, China is working to maintain control over supply amid heightened demand for advanced technology.
Conversely, Mexico, the world's largest silver producer, contributes 25% of the global silver output, with a staggering 80% of that production located in regions plagued by cartel-related violence. Any escalation in this violence could jeopardize operations, leading to logistical and transportation disruptions that might dramatically cut silver production.
We firmly believe that a "Commodities Supercycle" is currently underway, and silver is now facing its fifth consecutive year of deficit, and a squeeze is now unfolding. To prepare, we are looking at strategies using the 100-ounce silver contract and long-dated call spreads in the 5000 oz silver market.
The 100-ounce silver futures offer unique capital efficiency, meaning you can control larger positions with less capital. Traders typically need 5% to 10% of the total notional value (or the dollar amount of the position) to hold a futures position, versus holding an ETF, which can cost 50% to 100% of the notional. The 100-ounce Silver futures offer a pocket-sized product that delivers full-sized potential.
For example, we see value in systematically purchasing the 100-ounce silver contract at regular intervals. You can layer in over time and potentially average into the position for the next rally.
One example would be to focus on the May 2025 100-ounce silver contract and use a dollar-cost averaging approach by purchasing 100 ounces of silver at $90/oz, 100 ounces at $82, and 100 ounces at $71, with a target of $150/oz.
If filled on all three contracts, your average price will be $81/oz; therefore, every dollar move Silver makes on the three contracts will be $300 since you control 300 ounces. If the $150/oz price objective is achieved, this will result in a gain of approximately $20,700 (300 oz times $69 rise) minus any commissions or fees. Traders should also consider proper risk management, such as a dollar-cost averaging approach, with a hard stop on three contracts at $65/oz. If that were to occur under this scenario, it would likely result in a loss of $4,800 plus any commissions or fees.
For Example purposes only, one could purchase the June 2026 Silver futures $130.00 call option while selling a June 2026 Silver futures $140.00 call against it. The plan will create a calculated risk Bull Call spread and costs $6,000 plus any commissions and fees, while your maximum gain would be $50,000, less your initial cost, if silver futures close above $140.00/oz at expiration on May 28, 2026. We believe this strategy achieves a low-risk, high-reward profile. Staying ahead of the silver market has never been easier. To help you develop a trading plan, I reviewed 25 years of my trading strategies and created a free resource: the "5-Step Technical Analysis Guide." This guide outlines all the technical analysis steps you need to create an actionable plan for entering and exiting the market.
Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program.
One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading.
For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points that can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program that cannot be fully accounted for in the preparation of hypothetical performance results all of which can adversely affect actual trading results.
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