Global supply is extremely tight, and silver is experiencing an epic short squeeze.
A storm triggered by a shortage of physical supply is sweeping through the global silver market. As inventories at the Shanghai Futures Exchange (SHFE) plunge to a near decade low, silver prices are following gold’s rally, surging to historic highs.
On Monday, silver prices briefly touched an all-time high of $58.84 per ounce, extending last Friday’s nearly 6% increase and marking six consecutive trading days of gains. So far this year, silver’s value has nearly doubled, with the increase far surpassing gold’s robust 60% performance.
Behind this powerful rally are speculative bets by traders on persistent global supply tightness. As the overall Bitcoin and cryptocurrency market declines, a physical squeeze is playing out in the silver market. After a historic squeeze in the London market months ago, the pressure has now shifted to other hubs.
Market participants are closely watching this “perfect storm,” directed by China’s critical inventory levels, strong industrial demand, a speculative frenzy, and potential trade policy risks. Amid the inability of major global inventory centers to effectively buffer shocks, the vulnerability of the silver market is magnified, and any fresh impact could trigger even greater price volatility.
Shanghai Inventory Crisis, Global Shortage Dominoes Fall
Wind data shows that in the week of November 24, silver inventories at the Shanghai Gold Exchange dropped by 58.83 tons, reaching 715.875 tons—a new low since July 3, 2016. On November 25, the inventory in that warehouse barely increased by 21.3 tons, but still remains near its lowest level in almost ten years.
Zijie Wu, analyst at Jinrui Futures, points out, “The tightness comes from increased exports to London.” According to Jiemian News, fearing tariffs and rising cross-border shipping costs, this year there has been a wave of “arbitrage migration” between important warehouses in New York and London for commodities like gold, silver, and copper, ahead of tax hikes. ING’s Warren Patterson and Ewa Manthey note that these shipments were triggered by recent supply tightness, which once pushed silver prices to all-time highs. Data shows China’s silver exports in October surged above 660 tons—a historical record.
Analysts point out that Shanghai silver futures prices have now sunk into a deep “spot premium” structure—in other words, near-term contract prices are higher than longer-term contracts—indicating severe short-term supply pressure. Zijie Wu notes, given the low inventory levels and so-called non-elastic (or sticky) supply, market concerns remain high.
Multiple Demand Drivers, Strong Fundamental Support
In addition to supply shocks, robust demand across several fronts is giving silver prices strong fundamental support.
First is industrial demand. Zijie Wu adds, “The fourth quarter is typically peak season for solar installations,” and photovoltaic modules are one of China’s major areas of silver consumption.
On November 1, the Ministry of Finance and State Administration of Taxation issued an announcement regarding gold-related taxation policies. Members or clients trading standard gold via the Shanghai Gold Exchange or Shanghai Futures Exchange will be exempt from value-added tax when selling standard gold, while those selling standard gold outside the exchanges must comply with existing VAT regulations.
Liu Shunmin, risk manager at Shenzhen Guoxing Precious Metals Co., Ltd., says:
“After the new regulations, many merchants are unsure how to price their products, so some have shifted their focus to silver.”
Meanwhile, speculative demand is flooding in with unprecedented momentum. TD Securities commodity strategist Daniel Ghali believes, “Much of the current physical demand in the London market is purely speculative.” Silver ETFs—which gauge retail investor sentiment—recorded net inflows again in November. In the options market, silver call option volatility premiums have reached their highest levels since 2022, indicating the cost to bet on higher prices has soared.
Macro and Policy Risks Intensify Market Tug-of-War
Macroeconomic expectations and potential policy changes are adding further uncertainty to the tug-of-war between bulls and bears in the silver market. There is mounting market expectation that the Federal Reserve could cut rates this month, which enhances the appeal of precious metals like gold and silver as hedges against fiat currency depreciation.
Even more concerning for the market is U.S. policy risk. There are rising concerns that a Trump administration could impose tariffs on silver. Daniel Ghali warns, “If tariffs are placed on silver, any silver that has already reached the U.S. would be locked in,” and if Shanghai is still recovering from aiding London at that time, “the impact would be huge.” This fear of a sudden U.S. premium has led some traders to hold off on shipping metal out of the United States, leaving little hope for global market relief if conditions tighten further.
David Wilson, BNP Paribas global head of commodity strategy, notes, “Last week’s rally was speculative-driven,” and investors should watch the gold-silver ratio, which has dropped to around 70, relating to the relative valuation level of silver against gold.
With silver prices hitting new highs, investor sentiment is surging and shares of related mining companies are in demand. On Monday, silver mining stocks generally rose. U.S.-listed Coeur Mining Inc. jumped 3.5% at one point; Pan American Silver Corp. rose 2.5%. In London, Fresnillo Plc soared more than 8%. Australia’s Sun Silver Ltd. and Silver Mines Ltd. also surged, at one point by 21% and nearly 13%, respectively.
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