A major technical failure that halted futures trading for nearly half a day triggered a dramatic market panic, serving as the catalyst for a long-anticipated price explosion. While trading screens went dark, investors scrambled to secure physical metal, highlighting warehouse stockpiles that have reached multi-year lows. Is the market heading toward a severe supply shortage?

Industrial Demand and Indian Buying Create Perfect Storm

Silver is heading toward its fifth consecutive annual supply deficit. According to the Silver Institute, the market will face a shortfall of nearly 820 million ounces by the end of 2025. Alongside substantial consumption from the solar industry, new demand drivers are emerging: artificial intelligence data centers and the global shift toward electric mobility are significantly increasing consumption.

Simultaneously, India has emerged as a powerful market participant. The world’s largest consumer of the metal absorbs approximately 4,000 tonnes annually. A notable factor is the tradition among Indian farmers, who often invest their harvest profits directly into physical silver rather than financial products, creating consistent price pressure independent of Western financial markets. Furthermore, the recent classification of silver as a critical mineral in the US and the threat of new tariffs are making traders increasingly reluctant to export available material, tightening the market further.

Technical Glitch Exposes Underlying Market Jitters

The immediate trigger for the price surge was an eleven-hour trading halt on Friday, caused by a cooling system failure at exchange operator CME. With the COMEX futures market—the primary global pricing benchmark—inactive, market liquidity evaporated and bid-ask spreads widened dramatically. When trading finally resumed, pent-up pressure erupted in a vertical price move. Silver skyrocketed 6.81 percent, achieving a new record high of $56.45 per ounce. This places the precious metal precisely at its 52-week peak.

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The systems failure acted merely as a spotlight, revealing how jittery the market has become due to fundamental scarcity. Inventories in London vaults have plummeted by a third since 2022, and physical availability is shrinking rapidly worldwide:

• Chinese Depletion: Stockpiles at the SHFE have fallen to their lowest level since 2015.
• Western Outflows: Since October, a staggering 75 million ounces have been withdrawn from COMEX vaults.
• Surging Lease Rates: In London, the cost of borrowing silver temporarily exploded to an annualized 200%—a clear signal of an acute physical shortage.

Stagnant Supply Meets Inelastic Demand

The supply side of the equation offers no relief. Global mine production has been stagnant for a decade, with resource depletion and a lack of new investment particularly hampering output in Central and South America. Because new mining projects take years to become operational, the current explosion in demand is hitting a completely inelastic supply base.

Silver’s impressive performance, boasting a year-to-date gain of over 70 percent, has significantly outpaced even gold. The gold-to-silver ratio has recently collapsed, underscoring the industrial metal’s massive catch-up rally. As long as this fundamental supply-demand imbalance persists, Friday’s record high is unlikely to be the last.

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