Goldman Sachs Breaks Down Silver's Predicament: Dollar Relief and AI, Solar Demand Extinguish Simultaneously

The silver market is caught in a double bind. The dollar's brief pullback failed to lift silver prices, and the simultaneous collapse of AI data centers and the solar sector has pulled the rug out from under the industrial-demand thesis for silver, while the parallel surge in short positions and put-option premiums has further squeezed the room for a long-side rebound.

Goldman Sachs commodities strategist Robert Quinn, in his latest silver tracking report, directly characterized the current situation as "Still Stuck." Over the past three weeks, managed money has net sold a cumulative $2.2 billion in silver futures, with net long positions falling to the lowest level in Goldman's two-year chart, far below this February's trough and a world away from the peak of over $9 billion in the summer of 2025.

Meanwhile, panic signals in the options market have lit up in tandem. Goldman data show that the 3-month 25-delta put-call skew in silver briefly touched the 98th one-year percentile, the highest since July, indicating the market is buying downside protection on a large scale. Quinn noted that although the current extreme short crowding creates the conditions for a tactical rebound, the Iran situation continues to push up oil prices and the dollar, making any rebound difficult to sustain.

$2.2 Billion in Three Weeks: Shorts Keep Pouring In, Net Longs Fall to Two-Year Low

Positioning changes over the past three weeks reveal a structural deterioration in the silver market. According to the U.S. Commodity Futures Trading Commission (CFTC) Commitments of Traders (COT) report cited by Goldman, in the week ended October 13, managed money net sold $565 million, comprising $160 million in long liquidation and $405 million in new shorts, marking the third consecutive week of net selling and a cumulative three-week total of $2.2 billion. December silver futures fell 3.4% over the same period.

Goldman's managed money net positioning chart shows current net longs at about $1.7 billion, not only below this February's interim low but the lowest level in Goldman's two-year data set. By comparison, the same metric stood above $9 billion in the summer of 2025.

Structurally, this round of selling is not merely long-side stop-losses but new shorts and long exits moving in parallel, indicating that a considerable number of active short sellers have entered the market.

Dollar Loosens, Silver Still Falls: The First Line of Defense Breaks

Previously, the dollar had been seen as the core variable suppressing silver prices. In mid-October, U.S. core CPI came in above expectations, the dollar index broke above the upper edge of its 18-month range to hit a one-year high, rate-hike expectations spiked, and silver plunged 6% in a single day to a two-month low.

Goldman's chart of managed money long positions versus the dollar index shows the two moving almost in lockstep—as the dollar index approached 102.5, long positions slid from a peak of about $9.3 billion in May to about $4.7 billion.

However, between October 13 and 20, the dollar fell 0.5% while silver fell another 2.6%. This divergence broke the previous logical framework that "the dollar is the sole drag." Quinn explicitly states in the report that the dollar's brief ebb did not give silver any breathing room, because the second leg supporting the bullish silver narrative—the industrial demand outlook—has broken down in tandem.

Goldman tracks two equity baskets as real-time barometers of structural industrial demand for silver: the data center basket (corresponding to AI infrastructure buildout) and the solar basket (photovoltaics being one of silver's largest industrial uses). Two weeks ago, both baskets were rising, but silver prices were unmoved; now both are falling in tandem, and silver has begun "obediently" following them lower.

Quinn wrote in the report:

"U.S. solar companies abandoned their recent rebound, falling 4.7%; Chinese solar performance was similarly weak, down 1.6%; the data center sector was hit hard as memory, neocloud and broader credit-quality concerns hammered AI stocks, plunging 7.9%."

Over the following five trading sessions, the data center and solar sectors remained depressed. Goldman's China solar index fell from over 60 points at its May peak to below 40, nearly halving.

More alarming is a negative feedback loop Quinn reveals: part of the dollar's interim pullback stems precisely from the risk-off sentiment triggered by the AI selloff, and the AI collapse itself directly strikes at the industrial demand story for silver. In other words, the only force capable of pushing the dollar down (AI panic) is the very same force destroying the bullish silver thesis. Dollar up, silver down; AI collapse, silver also down—both roads lead to the same outcome.

Shorts Crowded, Options Market Flashes Panic Signal

Positioning data and the options market together paint a picture of highly crowded shorts.

Quinn noted that after the COT reporting cutoff, new shorts continued to pour in: total silver futures open interest rose by about $1.6 billion in a single week during the mid-October price slump, with contract counts jumping from about 107,000 to about 114,000. Falling prices accompanied by rising open interest is a textbook signal of new short entry, not passive long-side stop-losses.

The options market signal is equally clear. Goldman's standardized 3-month 25-delta put-call skew jumped from about -10 to nearly -3, briefly touching the 98th one-year percentile, the highest since July, indicating the market is buying downside protection on a large scale.

Quinn also noted that such extreme short positioning has historically often been a precursor to violent short squeezes. The reference case he cites is late July this year—when positioning was similarly heavily washed out, after which the December contract rose 15% in six weeks.

Tactical Rebound Window Exists, but Iran Variable Looms Large

Quinn acknowledges in the report that a tactical rebound opportunity currently exists, but immediately sets out clear constraints:

"While this offers a tactical rebound opportunity, the Iran war and its impact on the dollar remain unresolved variables. If the conflict does not end, silver will struggle to achieve a convincing rebound unless the FX-energy beta narrows substantially."

The core logic of this statement is that every escalation of tensions in the Strait of Hormuz pushes up Brent crude prices, which in turn strengthens the dollar through the "FX-energy beta" channel. With Brent crude back above $110 and WTI near $99, and Iranian attacks on shipping still escalating, this transmission mechanism is unlikely to fade in the near term.

The gold-silver ratio has widened from about 70 two weeks ago to about 72. Investors who in August bet on silver reaching $90 via digital options now need a gain of about 57% just to break even.

Quinn and market observers believe that for silver to break the deadlock, one of the following two triggers is needed:

The latter is considered more likely—a market that is pricing three rate hikes while data centers fall like dominoes could change its stance at any moment, and once it turns, the most crowded short positions in the silver futures market will face an extremely painful day.

Until then, silver remains, as Quinn's report title says: "Still Stuck." Risk Disclosure and Disclaimer

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