Looking to the Futures

After spending 10 years in the wilderness trading between $15 and $30, silver took off last year. The front-month silver futures contract (/SI) started last year below $30 and ran up as high as $82.67 before ending the year above $70. It then had a supercharged January, gaining over 50 points to reach an all-time high of $121.785 on January 29th. The day after reaching the apex, it dropped over 40 points in a one-day crash for the ages.

Following that wild ride, silver has seen continued volatility. Historical volatility for silver has been below 35 for the vast majority of the past five years. Since the price rally began last summer, historical volatility has climbed above 40 and stayed there. The current 20-day historical volatility is over 60, as is the 63-day HV. Those timeframes are commonly used in these calculations since they represent approximately one month and one quarter respectively.

One can point at several fundamental sources for higher volatility. The dollar index ($DXY) has also seen increased volatility since the start of the year. Adding fuel to the volatility fire, crude oil (/CL) nearly doubled following the outbreak of the conflict in the Persian Gulf, and energy prices continue to move sharply on news on the war with Iran. Related to that, economic data releases have been all over the place. Surface-level employment numbers remain strong, but the U-6 (underemployed and long-term unemployed) unemployment rate is climbing. Consumer spending remains healthy, but consumer debt is at an all-time high. Core inflation has been steady, but increases in energy prices take a while to reach the broader economy.

As a result of the economic data and energy uncertainty, Fed funds rate expectations have also seen increased movement. At the beginning of the year, rates traders were highly optimistic about rate cuts, with a 94% probability of a reduction by the end of the year according to the CME FedWatch Tool. Today, the highest odds favor maintaining the current range of 3.50-3.75%, with a 45% chance of a hike. For the January 2027 meeting, this year started with a 95% chance of a reduction in rates, with 2 or 3 cuts rating as most likely. Today there is a 60% chance of a higher rate. Short-term rate increases tend to have two negative effects on precious metals. First is the impact on the dollar, since a stronger dollar buys more silver (or gold, platinum, etc.). The second is making short-term debt a more attractive safe-haven relative to metals.

The most recent bout of high volatility has occurred over the past few trading days. The front-month contract for July delivery lost nearly 18% in the four trading days from last Wednesday to yesterday. That was due in part to an improvement in the projected supply for the year, according to a research note from UBS. The note reduced the bank’s estimated 2026 supply deficit from 300 million ounces (moz) to 60 moz. Demand from solar panel manufacturing is expected to drop as producers shift toward technologies requiring less silver. Forecasted demand for jewelry and silverware is also expected to decline. The forecast for mine output was increased to 850 moz, in line with the Silver Institute annual supply forecast released in April.

The one-year daily chart shows the parabolic runup that stopped abruptly at the end of January. That crash also led to the mesa on the historical volatility graph. The day of the collapse, 20-day HV ran up from 93% to 164%, then HV dropped from 160% to 86% once that day rolled off the calculation. Looking at the SMAs, the crash represented a similar paradigm shift. The 9-, 20- and 50-day SMAs had all been in a bullish setup for three months. Over the past three and a half months, the 9-day has crossed the 50-day SMA five times. Despite the volatility, the RSI has avoided overbought and oversold territory over the same period.

Pending Home Sales 10:00 AM ET

New futures products are available to trade with a futures-approved account on all thinkorswim platforms: 

• Ripple (/XRP)
• Micro Ripple (/MXP)
• 100 OZ Silver (/SIC)
• 1 OZ Gold (/1OZ)
• Solana (/SOL)
• Micro Solana (/MSL)

Visit the Schwab.com Futures Markets page to explore the wide variety of futures contracts available for trading through Charles Schwab Futures and Forex LLC.