The Australia and New Zealand Banking Group, or ANZ-Group for short, is one of the largest financial institutions in the Asia-Pacific region. Founded over 180 years ago, the bank now operates in 33 markets and has an excellent market overview, particularly in the precious metals sector, due to its activities throughout Asia. The bank recently attracted attention with its assessment that there is an ‘increasing risk’ of a silver short squeeze in London.

As few institutions can provide such precise and timely analyses of Asian gold and silver demand, and the ANZ Group is simultaneously perceived as neutral and conscientious in its assessment, the report from March 18, 2025, received widespread attention globally. It reveals that the scarcity of available silver is real and should be taken into account.

The analysts at the Australia and New Zealand Banking Group believe that silver remains undervalued compared to gold. This is happening at a time when the London market is struggling with liquidity shortages and the USA is having difficulties ensuring an adequate supply of silver. These factors are not insignificant for the silver price. Therefore, the bank expects a short-term trading range that will rise to 34 to 36 US dollars per ounce.

Will the Lack of Silver in London Trigger a Short Squeeze?

The analysts are looking at the silver market in London with concern. ‘Moreover, the risk of a short squeeze is increasing as swap dealer positions are net short at levels not seen since 2020. We believe these developments will make silver vulnerable to a price increase,’ the bank wrote in its March 18 report, reflecting the problems the London Metal Exchange is currently facing.

A historic supply disruption has occurred at the Metal Exchange. Silver stocks have declined sharply. This has led to higher borrowing costs and reduced availability of freely tradable metal. The silver stocks of the London Bullion Market Association (LBMA) have now reached a multi-year low, further intensifying concerns about available supply.

Due to fears of new tariffs in the USA, a lot of silver has been moved from London to New York this year. Silver stocks in LBMA vaults have fallen by 128 million ounces since November 2024 to just 722 million ounces, while stocks on the New York Comex have risen by 101 million ounces to 441 million ounces.

‘Low inventory levels at the LBMA suggest a decline in freely available silver stocks.’

The danger of a shortage is further exacerbated by swap traders. They hold their largest net short position since 2020, which further increases the risk of a short squeeze. ‘Low inventory levels at the LBMA suggest a decline in freely available silver stocks,’ write the analysts of the ANZ Group in their mid-March report.

At first glance, it may seem that the USA is benefiting from the large amount of silver currently coming into the country from London. However, since only 30% of American silver demand is mined within the USA, the country’s industry is critically dependent on continuing to import enough silver.

Although the solution to the problem is virtually on the doorstep with Mexico, the world’s largest silver producer, most market participants currently prefer imports from London, as US President Donald Trump threatened Mexico with new tariffs immediately after taking office.

Domestic Production is Not Enough to Meet US Silver Demand

The country cannot pull itself out of the swamp by its own bootstraps, so to speak, because silver mine production in the USA has steadily declined in recent years. While silver production was 38 million ounces in 2014, the United States produced only 32 million ounces of silver in 2023. The volume of recycled silver has also decreased by one percent over the last ten years.

The required silver imports have come from Mexico and Canada so far. However, Donald Trump wants to solve old problems such as immigration issues at both borders with new tariffs. The Australia and New Zealand Banking Group therefore expects that it will not be possible for the USA to replace its previous silver imports from Mexico and Canada with imports from Peru or Chile in the short term, should Donald Trump’s announced import tariffs on Canada and Mexico remain in place permanently.

“We believe this will keep the effective import costs high for the foreseeable future,” the analysts of the ANZ Group note with little optimism. The institute estimates that the supply-demand gap in the USA will continue to be around 190 million ounces. This corresponds to about one-fifth of the global silver supply. The strong demand for silver from sectors such as 5G, artificial intelligence, electric vehicles, and photovoltaics will remain high and thus have a supportive effect on the price. At the same time, investment demand for silver benefits from tighter fundamentals and a loosening of monetary policy.

The lack of primary silver mines is having an increasingly negative impact

“The market deficit for silver is likely to persist for the fifth consecutive year,” estimates the ANZ Bank. Although the silver deficit is thus anything but a temporary factor, global silver production will increase by only two percent to 844 million ounces this year. This is due to the continued weak importance of primary silver mines.

This problem is as old as it is unsolved. For decades, only 25 to 30 percent of annual silver production has come from mines where silver is the main product and thus the focus of management’s interest. For the other mining companies – and they are the overwhelming majority in this case – silver is merely a byproduct.

Of course, rising silver prices are welcomed here too. But no one in these corporations will come up with the idea of ramping up their own production because more money can be earned with the silver produced on the side. Production is therefore only increased when demand for the respective main product, such as lead, zinc, but also gold and copper, rises significantly and leads to higher revenues.

Are purchases of silver coins and bars the drop that will make the barrel overflow?

Since the price development of silver has been rather disappointing over the last 15 years, only the bare minimum was invested in the expansion of existing mines and the exploration of new deposits. As a negative consequence of this development, even primary silver mines are not able to increase the supply of silver in the short term today. Therefore, supply growth will remain limited beyond 2027. Moreover, Metal Focus estimates that global mine supply will peak at 856 million ounces of silver in 2027. This means that the silver market will remain tight for years to come.

How tight, however, is decided by investors. Their demand for physical silver in the form of coins and bars for investment purposes will not only determine whether silver prices can keep pace with the recent rise in gold. It also determines whether a shortage of silver can expand into a full-blown short squeeze in the futures markets. This is very easily possible when a high industrial deficit coincides temporally with massive demand for physical silver by investors.

In recent years, demand for silver as an investment product has been weak. Although an increase is expected for 2025, this is occurring from a very low level. A return to previously achieved levels could quickly dramatically exacerbate the situation in the silver market.

At Goldinvest.de, we have also long been convinced that the silver price has considerable potential, which is why we are closely watching a number of interesting silver companies. These include Summa Silver (WKN A2P4EE) with two projects in the USA, which recently published a resource estimate; Silver47 Exploration (WKN A408EQ) with an extremely exciting, huge project in Alaska, which also already has a resource; and Terra Balcanica Resources (WKN A40DA5) with the Viogor Zanik project in Bosnia, where high silver and antimony contents have already been proven – and which is about to start the next drilling program. All these companies should be able to benefit disproportionately from persistently high silver prices and especially from a further increase in the precious metal. We will report!