Silver’s sharp 178% rally this year marks a decisive structural turning point, not a speculative blow-off. The price action reflects a global repricing driven by acute physical scarcity, rapidly expanding industrial demand, ongoing monetary dilution, and a clear shift of price discovery toward Asia, particularly China. Crucially, this rally is being led by deliverable metal demand, not by leveraged futures positioning.

That divergence became unmistakable during the Christmas holiday period. While Western benchmark markets such as COMEX and LBMA were closed, Asian markets remained active. Physical silver in Shanghai surged close to USD 82, even as COMEX prices lagged. This premium is not a temporary distortion; it is a warning signal. When paper markets went offline, the physical market delivered a clear message-silver is scarce, inventories are depleted, and buyers are prepared to pay up for immediate delivery.

The most compelling evidence of tightening supply comes from the Shanghai Futures Exchange, where silver inventories have fallen to just 715 tonnes, the lowest level since July 2016. For context, Shanghai warehouses held over 5,000 tonnes at the pandemic peak in 2020—an 86% collapse in visible inventory in less than five years.

The metal has not vanished; it has migrated from paper traders who rarely take delivery to industrial users who must secure supply to keep production lines running, to long-term investors and private vaults across Asia, London, and Singapore, away from exchange warehouses and outside the banking system

This transfer from weak hands to strong hands is pivotal. Once it reaches critical mass, market structure changes-and pricing power shifts decisively to physical buyers. In October alone, China exported a record 660 tonnes of gold, the largest single-month outflow on record. When visible inventories are drained at this pace, prices do not adjust gradually-they gap higher.

Supply Side Hiccups

The supply side is structurally broken. Despite materially higher prices over the past two years, global silver mine output remains flat. This is not cyclical; it is structural. Silver mining cannot respond quickly to price signals. Bringing a new mine into production typically takes seven to ten years, encompassing permitting, feasibility studies, capital deployment, infrastructure build-out, and workforce development. Even projects currently underway are unlikely to add meaningful supply before 2027.

Recycling offers little relief. Unlike gold, silver is embedded in minute quantities across millions of devices-smartphones, solar panels, electronics, medical equipment-making recovery uneconomic at prevailing prices. Once silver is used industrially, it is effectively consumed, permanently removed from the accessible supply pool.

In short, silver demand destroys supply rather than replenishing it. That reality combined with collapsing inventories and inelastic industrial demand, is what underpins silver’s dramatic 178% surge and explains why this move represents a structural repricing, not a fleeting rally. Silver is no longer just a high-beta cousin of gold. It is emerging as a strategic industrial and monetary asset.

(Author is the founder of SS WealthStreet. Views expressed are the entirely personal view of the author)