If you thought silver was done surprising people after its monster 2025 rally, think again. The metal is swinging wildly, and Goldman Sachs has a message for anyone hoping things calm down: they won't.

The iShares Silver Trust (SLV) tracks silver's moves, and what a ride it's been. The metal jumped 136% in 2025, its strongest annual performance since 1979 when the Hunt brothers famously tried to corner the entire market. That momentum carried into 2026, with silver hitting a record close of $81.16 per ounce on Tuesday.

Then reality hit. Prices dropped 3.7% Wednesday and fell another 3.8% Thursday morning. Welcome to the new normal.

Why London's Empty Vaults Are Breaking the Market

"We expect extreme price swings to persist, both up and down, and advise volatility-averse clients to remain cautious," Goldman Sachs commodity analyst Lina Thomas wrote in a Thursday note.

The core problem is a liquidity crunch in London, where global silver prices are set. Here's what happened: tariff fears pushed traders to ship massive amounts of silver into the U.S. throughout 2025, even though silver was formally exempted from tariffs last April. The threat of potential 50% tariffs was enough to keep metal flowing westward.

That drained London's vaults. Meanwhile, physically backed silver ETFs were absorbing supply at the same time, and most of that metal gets stored in London. Double squeeze.

When inventories thin out, the silver leasing market goes haywire. Borrowing costs spiked, signaling acute physical tightness. "Thinner inventories create conditions for squeezes," Thomas said.

The numbers tell the story. Normally, 1,000 tonnes of weekly net silver demand lifts prices around 2%. Under current conditions, Goldman estimates that same demand now moves prices roughly 7%. The market's sensitivity has tripled.

This Isn't a Temporary Glitch

Goldman doesn't think U.S. tariffs on silver are likely, but uncertainty alone is wreaking havoc. Look at gold: even after Washington confirmed in August that gold would stay tariff-free, most of the metal stayed parked in New York COMEX vaults instead of heading back to London.

Silver could easily follow that pattern, keeping markets dislocated and volatility elevated regardless of policy clarity.

"As long as silver remains dislocated in the U.S. and liquidity in London is not restored with silver from elsewhere, prices could rise even further if investor enthusiasm persists," Thomas said.

China Just Made Things Worse

China, one of the world's biggest silver exporters, introduced export controls on January 1. All shipments now need government approval.

Goldman says the measures don't guarantee restrictions will actually be imposed. But the threat alone fragments the market. Participants start hoarding supplies instead of sharing buffers globally. A once-integrated market becomes prone to sharp regional price spikes, draining liquidity and amplifying volatility.

Where Does Silver Go From Here?

Goldman sees room for silver to climb higher if investor enthusiasm continues and London's liquidity stays squeezed. Physically backed ETF holdings remain below their 2021 peaks. Managed money positioning in COMEX futures sits below historical averages. There's theoretical fuel for another leg up.

But the downside risk is just as real. Any meaningful restoration of London's supply could trigger a sharp reversal.

The takeaway? Silver's violent swings aren't market noise or a temporary anomaly. They're the new structural reality of a market running on fumes in the places that matter most. Goldman's advice for volatility-averse investors is simple: proceed with caution, because this chaos isn't going anywhere.