Why silver bears just flipped bullish after record plunge

Silver's 30% plunge on January 30 is one for the record books. The drop in the shiny white metal was the worst since 1980, when the Hunt Brothers tried to corner the market, and it followed a massive silver rally that sent prices soaring nearly 250% in the past year.

The decline wasn't unexpected. I've been tracking markets for over 30 years and wrote last week that Wall Street futures trading legend Peter Brandt and pro strategist Marko Kolanovic were bearish, expecting a major move lower after silver's parabolic blow-off top.

Now that their warning has proven correct, the two have returned to the airwaves, but this time they're switching gears, ditching their bearish outlooks and tactically shifting bullish.

Their shift is a testament to how dramatically silver prices are moving. Volatility has skyrocketed, creating opportunities for traders and investors on both sides of the precious metal.

Hall of Fame pros who predicted silver crash now call for bounce

Ahead of Silver's swoon, Kolanovic and Brandt shared blunt warnings on Silver's paper market rally.

Former JPMorgan strategist Marko Kolanovic, whose career stretches back 20-plus years and includes roles at Merrill Lynch and Bear Stearns before a 16-year run at JPMorgan that helped him get inducted into the Institutional Investor Hall of Fame, predicted a reckoning of 50% for the metal in the coming year.

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Brandt, a 50-year commodities trading veteran whose career began in 1976 with ContiCommodity Services, a division of Continental Grain Company, sent a similar message, comparing the current parabolic spike higher to 2011's top (which he also accurately predicted).

After the silver tumble, though, these veterans think things got overdone, creating an opportunity for a short-term bounce higher.

"As much as I wrote against Silver past few days, today it just might bounce (16% drop is big!)," wrote Kolanovic on X.

Brandt struck a cautious, yet short-term, optimistic note, saying "Silver probably rallies off today."

He thinks we could get a snap back rally before another wave lower that washes out speculators, setting the stage for more durable gains.

"2026 is NOT 2011. In my mind, the 2011 rally was destined to return back to the teens. Not this time. I do believe there is more ahead for Silver but not until the hot shot know-it-all bulls are thorough washed out. Then price can go back up. Maybe not until later in 2026 or even early 2027," wrote Brandt on X.

Silver wars: Physical versus paper expose harsh reality

The chaotic sell-off exposed a massive structural fracture: the "Great Divorce" between paper contracts and physical metal.

For decades, Wall Street banks controlled silver prices by selling billions in "paper silver"—futures contracts that rarely resulted in actual delivery. But in 2026, China locked down silver exports, creating problems for companies in sectors that need the physical metal for next-gen solar and AI technologies.

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Facing a sixth consecutive year of supply deficits, those industrial buyers are no longer settling for cash. Instead, they're demanding bars, triggering a physical scramble that's drained COMEX and LBMA vaults to their lowest levels in decades. As a result, the scramble has created a "backwardation" trap where silver for immediate delivery is far more valuable than a paper promise for next month's delivery.

You can see the strain in the spiking paper-to-physical ratio, which has surged to 528 million ounces of paper exposure to 113 million ounces of physical silver, according to Investing.com.

The disconnect is real and substantial. Industrial buyers need silver to build next-gen technology, and AI demand is causing structural disconnects between the paper and physical markets as these companies demand delivery.

When the paper price "crashed" yesterday, it wasn't because demand vanished—it was because leveraged speculators were flushed out by spiking margin requirements in response to soaring silver futures.

The CME Group moved to a percentage-based margin system in January 2026, hiking maintenance margins to 15% for standard positions (and up to 16.5% for heightened risk). The exchange effectively ended the era of cheap "paper" speculation that allowed traders to control 5,000-ounce contracts with minimal collateral, creating a "margin trap" to prevent a clearinghouse collapse as prices surged toward $120 per ounce.

The move is reminiscent of how past silver spikes ended, including in 1980, when regulators similarly busted the Hunt Brothers' silver position by raising margin requirements.

In short, the move accelerated forced liquidation as prices dropped and highly leveraged and tapped-out speculators had to punt because they couldn't meet the new rules.

While the ticker flashed red, physical premiums in Shanghai and Dubai actually surged, trading as much as $20 over Western spot prices.

What's next for silver prices

Over my decades of tracking markets, I can't help but think the next likely outcome is a lot more of the same: volatility in the paper market and ongoing supply shortages.

That won't change unless the economy derails industrial demand or miners can boost supply, no easy feat given the nature of mining.

In fact, silver supply is likely to remain impaired this year even as some miners look to bring new production online.

On Jan. 28, Fresnillo, the biggest global silver miner, cut its 2026 guidance to 42–46.5 million ounces from 45–51 million, with CEO Octavio Alvidrez citing "operational phasing" and a shift to narrower, lower-grade veins. Meanwhile, Hecla Mining (HL), another big producer, plans production of 15.1–16.5 million ounces, below 2025 output.

That said, some production is likely to come online. Silver Storm Mining is restarting idled production at La Parrilla, Mexico, next quarter (it features a 2,000 tonne-per-day (tpd) mill), while Pan American Silver (PAAS) expects more silver production from Cerro Moro in the second half of 2026. Pan American guidanced is for 2026 silver production jumping to 25–27 million ounces from ~22.8 million in 2025.

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