Tight supplies have been fuelling the massive surge in silver prices, which has seen the metal rise more than 10% since last Friday.
On Wednesday, silver prices on COMEX hit a fresh record high of $59.645 per ounce, as the metal has climbed 100% since the beginning of this year.
A silver squeeze in October drove the price to $50. Analysts had attributed this surge to a temporary lack of physical metal.
Tariff concerns last spring drove a substantial flow of silver into the US, resulting in a shortage in the London market.
This dramatically reduced the supply of available or “free float” silver (metal not allocated to ETFs or other funds).
Bloomberg reported a 75% decline, with the amount plummeting from a peak of 850 million ounces to only 200 million ounces.
Metals Focus suggests the drop was even more severe, estimating the available metal fell to as low as 150 million ounces.
Silver demand in India surged to unprecedented levels, driven by the shift from gold, which was at record highs.
This increased demand further strained London’s silver supplies.
The market eventually stabilised as metal was moved from New York back to London, which relieved the pressure on supplies.
Initial surge
Silver found stability around $50 per ounce toward the middle of last month before surging to a new all-time high of $58.84 on Monday, and crossing $59 per ounce on Wednesday.
“So, silver can expect to be tested further this week so see just how solid, or otherwise, its recent gains prove to be,” said David Morrison, senior market analyst at Trade Nation.
The dramatic rise in prices this year makes silver the top performer among all the commodities.
According to Commerzbank AG, there are no new reasons for the exponential rise in silver prices.
“However, the known reasons still apply, namely tight supply, which is reflected in low inventories on the Shanghai exchanges,” said Carsten Fritsch, commodity analyst at Commerzbank.
One possible reason that has been cited occasionally is nevertheless worth mentioning.
There is reportedly speculation that US President Trump could introduce tariffs on silver, as the US Geological Survey (USGS) has placed silver on a list of critical minerals.
The price increase occurred a month ago, meaning its timing is not aligned with this news, according to Fritsch.
COMEX silver stocks have so far not registered any significant fluctuations.
Persistent global inventory crisis
The recent influx of silver into London has, according to Bloomberg, caused the supply squeeze to move to other financial hubs.
Silver inventories at warehouses linked to the Shanghai Futures Exchange have reached their lowest level in almost ten years, according to a FXstreet report.
Concurrently, rising silver lease rates indicate robust demand alongside a restricted availability of the metal.
The FXstreet report also argues that the current situation in the market can not be solved by moving the metal from one warehouse to another, as demand has outstripped supply for several years.
Silver is projected to experience its fifth consecutive structural market deficit, as reported by Metals Focus.
Although a 2% decline in industrial demand is anticipated—down from a record high in 2024, primarily due to price pressures—leading to a total demand drop of about 4%, flat mine output means production will still be insufficient to meet the overall offtake.
Macroeconomic outlook
Metals Focus forecasts a 95 million ounce supply deficit in the silver market this year.
This would increase the total market deficit over the past five years to 820 million ounces, equivalent to one full year of average mine production.
The accumulated supply deficit since 2010 already stands at over 580 million ounces.
Even with record-high prices, it is unlikely that mine production would increase quickly to offset the supply shortfall.
For the foreseeable future, the shortfall in silver supply will need to be covered by drawing down existing above-ground stocks, according to FXstreet.
Silver investors will also keep an eye on this month’s meeting of the US Federal Reserve as the market expects another interest rate cut.
Lower interest rates are beneficial for commodities such as silver, as the precious metal is an unyielding asset, unlike Treasury bonds.
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