Silver’s Structural Breakout

Silver’s surge above 58 dollars per ounce at the start of December marks far more than a reaction to short-term volatility. The metal has climbed to historic highs, breaking levels untouched even during previous bull markets, and the drivers behind this move point to a deeper structural shift. Shrinking inventories, tightening physical supply chains, and a wave of investment demand are pushing silver into a new pricing regime—one that several industry veterans say is only beginning.

The weekend turbulence following a 10-hour CME Group outage offered a dramatic backdrop, but many analysts argue the shutdown was a distraction rather than a catalyst. Clem Chambers, CEO of Online Blockchain PLC, called the outage “noise,” insisting the real story is the mounting pressure in the physical market. Exchange inventories in Shanghai have fallen to near decade-lows, while China exported an unusually large 660-tonne shipment of silver to London to help satisfy a spike in delivery requests. COMEX December delivery interest has also been elevated, with a notable share of open interest potentially standing for physical settlement. Chambers warns that even a fraction of these claims converting to physical delivery could strain the market: “Silver doesn’t have big buffers. It tightens fast.”

Retail investors, not sovereign buyers, are emerging as a powerful force. Silver-backed ETFs have reversed last year’s outflows and are once again registering net inflows. Bloomberg data indicates that global ETF holdings are trending back toward earlier-decade highs, while coin and bar sales at major mints have climbed, and bullion dealers across Asia are reporting multi-week delivery delays. Meanwhile, mine supply has shown minimal growth, with some operators posting year-over-year declines, and recycling volumes remain stagnant despite higher prices. The result is a tightening physical environment that raises the likelihood of future price shocks if demand holds steady.

India, however, is rapidly becoming the center of gravity in this story. Metals Focus reports that India now accounts for nearly 80% of global silver bar and coin demand, making it the world’s second-largest physical investment market after the U.S. Over the past five years, Indian households—particularly in rural regions—have accumulated 29,000 tonnes of silver through jewellery and 4,000 tonnes in coins. A new rule from the Reserve Bank of India may amplify this footprint further: starting April 2026, households will be allowed to pledge silver as collateral for credit, putting silver on the same financial footing that gold has long enjoyed. Anticipation of this change may already be influencing behaviour. India imported 2.72 billion dollars worth of silver in October, compared with just 430 million dollars a year earlier. This surge drained liquidity from London’s over-the-counter market and pushed lease rates to record highs—one of the key factors propelling silver above 50 dollars and keeping it near 59 dollars in late November.

Industry veterans describe the mood as unprecedented. At the recent LBMA conference, former Hecla Mining CEO Phil Baker said market participants were experiencing a level of stress he had never witnessed in his career. Large quantities of silver have been flown across continents to meet urgent demand, while inventories are no longer allowed to fall to previously acceptable lows. Baker sees India as the primary engine of global demand, noting that its October imports—nearly 60 million ounces, versus 15 million a year earlier—reflect “insatiable” appetite despite record-high prices in rupees. He also points out that industrial consumers, who account for roughly 55% of global silver use, are abandoning just-in-time inventory practices. December CME notices show 8,800 contracts—about 44 million ounces—standing for delivery, with a rising share allocated to end-users securing metal ahead of potential supply disruptions.

At the same time, the supply backdrop continues to deteriorate. The global silver market has been in deficit for five consecutive years. The shortfall in 2025 is expected to reach 100–200 million ounces, compounding previous deficits that were even larger. Baker argues that mining cannot close the gap: the permitting cycle for new projects now stretches 10–20 years, and even expansions of existing sites can take 5–10 years. Global mine output peaked in 2016 at 900 million ounces, and Baker believes production will remain below that level for at least another decade. Recycling, which contributes 150–200 million ounces annually, cannot expand meaningfully due to limited infrastructure. As a result, the only flexible supply is the metal already held by investors, institutions, and funds—a pool that is becoming harder to mobilize.

A generational shift among Western investors reinforces the imbalance. U.S. buyers have accumulated roughly 1.5 billion ounces of silver in bars and coins over the last 15 years, much of it stored in depositories or retirement accounts. Baker notes that this metal rarely returns to market, even after generational transfers, turning silver into a long-term strategic asset rather than a trading vehicle. This dynamic mirrors the macro forces driving gold’s rise—fiscal instability, geopolitical risks, uncertainty around tariffs and policy direction—and suggests silver is simply “catching up.”

What is emerging is a market defined not by speculative positioning but by underlying scarcity. As industrial users adjust to higher prices, India redefines global demand, Western inventories remain locked away, and mines struggle to respond, the balance of power continues to shift toward physical holders. Even after December’s surge, Baker and Chambers believe the real move lies ahead. As Chambers put it: “This isn’t the blow-off. This is the beginning.”