Following a 30% plunge, silver market veterans Peter Brandt and Marko Kolanovic have reversed their bearish stances, now anticipating a short-term bounce. The dramatic price drop, the worst since 1980, was triggered by margin restrictions and forced selling. This shift underscores the extreme volatility in the precious metal market and its potential for rapid reversals.

The collapse exposed the divide between paper contracts and physical silver. While paper prices plummeted, demand for physical silver from industrial buyers, particularly in sectors like AI and solar, remained robust. This divergence, coupled with supply deficits, has created a backwardation situation, where immediate delivery is highly valued, prompting a scramble for physical metal.

CME Group's move to a percentage-based margin system in January 2026, which increased maintenance margins, amplified the sell-off. This action, similar to those taken during the 1980s silver spike, triggered forced liquidations. Despite the paper market's turmoil, physical premiums surged in some markets, revealing the underlying demand.

Looking ahead, volatility is expected to continue in the paper market alongside persistent supply shortages. Miners like Fresnillo and Hecla Mining have adjusted production guidance, while Silver Storm Mining and Pan American Silver are aiming to increase output. The ongoing disconnect between paper and physical markets remains a key factor to watch.