Why Silver Prices Are Going From Strength to Strength

Silver prices have just crossed USD 61 per troy ounce, setting new all-time nominal highs. This upward trend is driven by deep structural forces and appears likely to continue.

As we highlighted in early 2024 in Is This the Beginning of Higher Silver Prices?, mainstream analysts and media had largely overlooked persistent silver deficits and accelerating industrial demand. That is now changing. Silver is receiving increased media coverage just as the pool of freely available metal tightens and the Western-led bullion system faces growing constraints in managing physical supply versus paper exposure.

This article outlines the key drivers behind the current price strength.

Shortage Concerns for Available Physical Silver Are Pushing Up Prices

While total LBMA vault holdings have recently increased — largely due to metal transfers from SGE and COMEX — to about 875 million ounces, most of this silver is allocated to specific parties and not available for general delivery. Paper silver products, bullion banks, and industrial users rely on the available “free float,” (which they call registered silver within COMEX) the portion of silver in the LBMA system that is readily deliverable—unallocated, unencumbered, and physically available to meet demand.

Recent credible estimates placed the LBMA silver free float as low as 200 million troy ounces, which is roughly 14 months of global silver deficits. This tightness has contributed to the recent silver squeeze and driven exceptionally high lease rates (exceeding 100% in late October), sending shockwaves through institutional markets.

To put this into perspective, the combined global silver deficit — largely driven by solar demand (see Surging Solar Panel Installations Are Draining Global Silver Reserves) — has totalled 678 million ounces over the past four years (source: Silver Institute).

As available metal tightens, the market responds with higher premiums, longer lead times, and upward pressure on spot prices.

Falling Confidence in Paper-Silver Backing Increases Physical Demand

For decades, bullion banks operated with high leverage, issuing far more paper claims than the physical silver backing them. This arrangement remained stable as long as participants were comfortable with unallocated exposure.

Recently, however, more industrial users and investors have been requesting allocated metal, not synthetic exposure. As more bullion becomes allocated, the available free float shrinks, creating shortages for all remaining participants.

These shortages have triggered alarm among industrial users who rely on a functioning free float market. Many are now pre-emptively taking delivery — reducing free float further and potentially creating a self-reinforcing cycle.

To counteract these pressures, rising spot prices become the primary market mechanism to reconcile physical constraints with outstanding obligations.
In short: silver prices need to move higher to restore balance.

Increased Media Exposure and Growing Retail Awareness

A third contributor to rising silver prices is increased media visibility and public interest, including broader coverage of silver’s persistent structural deficits, its irreplaceable industrial applications, and its still-low price relative to gold.

Media attention widens the investor base and boosts awareness of long-standing structural themes, prompting more retail and institutional buyers to enter the market—further strengthening demand and adding upward pressure to prices.

In Summary

These three factors — diminishing available silver reserves, investors shifting from paper to physical silver, and growing public awareness — are driving spot prices higher.

It increasingly appears that “the cat is out of the bag” for silver. Combined with rising geopolitical risks and concerns over global debt levels, silver prices are likely to continue trending upward. After all, when adjusted for inflation, the all-time high price of silver is equivalent to about USD 215 per troy ounce.

The Current Silver Supply Situation

Physical retail silver supplies remain relatively abundant for now, largely due to sizable bullion sellbacks in the United States over the past year. LBMA good delivery bar availability has also stabilised — for the moment. It is still a good time to acquire physical silver.

Store Silver, Gold and Platinum with Us

We are currently storing close to 20 million ounces of silver (about 2% of annual world supply) and we are adding roughly one metric tonne per day. With a capacity to store 320 million ounces — always held as private property owned by our clients — we are here to support you should the LBMA or COMEX systems encounter stress.

Store silver with us to gain legal, independently tested, and fully insured ownership in a secure Singapore jurisdiction that protects your metal from financial-system and counterparty risks.

Regards,

Gregor J. Gregersen

p.s. The Wall Street Journal recently visited our facilities as part of its documentary Why the World’s Wealthiest Are Sending Their Gold [and Silver] to Singapore, in which our vaulting operations are prominently featured. Have a look at this six-minute report.