Published on: 2026-02-26
Not all that glitters is gold. In 2026, silver became the market’s stress test for how quickly a “strategic materials” narrative can turn into a leverage unwind.
Silver hit an all-time high of about $121.6/oz on 29 January 2026, then gave up more than a quarter of its value the next day as technical selling and stop-loss triggers snowballed.
Silver functions as both an industrial metal and an investment asset but does not fit neatly into either category. Its price is influenced simultaneously by manufacturing demand, investment flows, and policy developments. As discussions about supply chains and “critical minerals” become more prominent, these factors have gained increased significance.
This report examines how mineral sovereignty, defined as states seeking to secure strategic resources and reduce reliance on competitors, is influencing the pricing of silver (XAGUSD) in 2026.
On 2 February 2026, President Trump announced “Project Vault”, a plan to build a strategic stockpile of critical minerals, backed by $10 billion in financing from the US Export-Import Bank and $2 billion from the private sector.
The stated goal was to reduce the risk of supply shocks for US manufacturers and to counter what Washington sees as Chinese influence over pricing in key minerals used across electric vehicles, defence, and high-tech manufacturing.
Project Vault is not specifically focused on silver, but its significance for XAGUSD lies in signalling that the United States is prepared to use raw materials security as a policy instrument. Such government actions typically result in markets assigning a greater policy premium to metals closely linked to industrial supply chains.
Before that on 30 December 2025, China named the 44 companies allowed to export silver for 2026–2027. The Ministry of Commerce framed these metals as critical to supporting domestic industries.
This decision influenced the market in January, as traders often interpret any Chinese export process as a potential restriction. Additionally, misinformation regarding a routine licensing document circulatedwidely online. Reuters reported that some social media accounts mischaracterised the document as evidence of new export limits, despite China processing applications and ultimately approving 44 exporters, two more than the previous year.
This situation exemplifies the practical impact of sovereignty concerns. Although policy realities are often nuanced, market reactions have become increasingly binary, equating “strategic metal” with “supply risk.” In a thin and volatile market such as silver, this reflex can drive price movements more rapidly than changes in underlying physical flows.
Silver’s role in the real economy is broad. It is used in jewellery, electronics, electric vehicles, and solar panels, and it is also held for investment.
This dual-use characteristic supports the credibility of the sovereignty narrative, but also contributes to market instability. When prices increase sharply, segments of demand adjust accordingly.
A clean example is Pandora. On 5 February 2026, Reuters reported Pandora would shift some products away from sterling silver towards platinum-plated alternatives, explicitly to reduce exposure to extreme silver price swings. Pandora said it aims to reduce silver jewellery to 25% of its offering over time, with at least 50% of its relevant silver assortment switching to platinum-plated in 2027.
Therefore, the sovereignty premium is limited. When volatility imposes significant commercial costs, some end users alter their product designs.
The Silver Institute expects 2026 to be the sixth consecutive year of a structural deficit, estimated at 67 million ounces, according to preliminary work by Metals Focus.
A critical nuance lies beneath this headline:
Industrial fabrication is forecast to fall 2% to 650 million ounces, driven by thrifting (using less) and substitution in photovoltaics.
Physical investment is forecast to rise 20% to 227 million ounces, as Western retail demand recovers after several weak years.
Total supply is forecast to rise 1.5% to 1.05 billion ounces, with mine supply up 1% and recycling expected to exceed 200 million ounces for the first time since 2012.
This dynamic illustrates the practical tension between sovereignty and volatility. While the market may appear tight based on data, the trajectory is complex, with shifting demand, substitution, and changes in marginal buyers.
The January surge was not just policy anxiety. Reuters described the move as a retail-driven frenzy, with fear of missing out visible in demand for coins and bars, and even purchase limits imposed by dealers during peak flows.
Subsequently, the market correction became driven by mechanical factors.
CME moved to a percentage-based margin method on 13 January 2026, then raised margins three times after that, on 30 January, 2 February, and 6 February. For COMEX 5000 silver futures, margins for non-heightened-risk accounts were raised to 18% from 15%, effective after the close on 6 February.
This is significant because rising margin requirements in a declining market force less-capitalized participants to reduce risk exposure. The process is technical rather than moral.
The price path reflects that stress. On 2 February, Reuters reported spot silver down around 7% near $78/oz, and down roughly 37% from the record high.
On 5 February, Reuters reported silver down nearly 14–15% on the day amid a broader liquidation, as a stronger dollar and a risk-off tape hit precious metals.
On 6 February, Reuters reported silver rebounded sharply to about $77.33/oz after dipping below $65 earlier in the session, but it was still headed for a weekly drop after steep losses the week before.
This represents the volatility aspect of the analysis. While sovereignty-related news may initiate market movements, leverage and margin regulations determine the magnitude of price changes.
In the current market, price levels are less about precise technical thresholds and more about the behavioural triggers they represent.
The $120 area is the blow-off zone. It is where momentum, retail psychology, and positioning can quickly run away from fundamentals.
The $60–$70 area is where multiple analysts have pointed to a more “fundamentally supported” range after the spike, even while the longer-run deficit narrative remains in play.
These levels function as critical thresholds. At higher levels, market positioning becomes the dominant factor, while at lower levels, discussions shift toward deficit calculations.
Two developments could significantly alter the dynamics described in this analysis.
A real geopolitical thaw
Reuters framed one leg of the early-February sell-off as premiums coming out when US–China and US–Iran tensions eased. Even a partial de-escalation can drain the “rush to hard assets” trade.
Faster-than-expected demand adaptation
Pandora provides the most prominent public example, while the Silver Institute also highlights substitution and thrifting in photovoltaics. If these trends accelerate, maintaining the sovereignty premium at elevated prices becomes increasingly difficult.
Even with the big-picture “sovereignty” story in play, short-term price moves are still being driven by macro forces and market positioning. On 5 February, silver dropped as the US dollar strengthened and a wider equity selloff forced some investors to liquidate positions.
In the coverage that followed, the explanations were more practical than philosophical. RJO Futures strategist Bob Haberkorn noted that some traders were running into margin issues and had to close out metal positions after taking losses in equities. City Index / FOREX.com analyst Fawad Razaqzada also pointed out that volatility often stays elevated after sharp moves, which can push prices lower before things settle down.
This is the key near-term driver for XAGUSD: even if the longer-term strategic story is still intact, a stronger dollar and forced de-risking can take control of the price action in the short run.
Factors supporting silver prices
A projected 67 million ounce deficit in 2026, with investment demand expected to rise even as some industrial demand cools.
A policy backdrop where critical minerals stockpiling is openly back on the table in the US, and strategic materials language is now mainstream.
A market primed to treat Chinese licensing and export governance as a supply risk signal, even when the details are more routine than the rumour mill claims.
Factors exerting downward pressure on silver
The same feature that powers rallies also powers crashes: leverage. Margin hikes and stop-driven selling can turn a correction into a cascade.
Visible demand adaptation when volatility becomes commercially damaging, as Pandora’s shift shows.
The “cooling” signals cited by analysts, especially in solar and jewellery demand at elevated price levels.
Potential catalysts for a change in outlook
Fresh escalation in geopolitical tension, or a policy signal that materially tightens supply expectations.
On the downside, clearer evidence that substitution and thrifting are scaling up faster than investment demand can offset.
On EBC Financial Group’s platform, XAGUSD represents silver priced in US dollars per ounce. In 2026, this price will reflect not only supply and demand dynamics but also heightened sensitivity to policy decisions, licensing, and supply chain politics. The market has demonstrated significant volatility when these narratives intersect with leverage.
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