Silver Market Analysis: Shortages & Price Dynamics

Jeffrey Christian: You know, a lot of the investment demand is driven by economic and political uncertainties, and those uncertainties aren’t going away, and they’re not getting resolved. If anything, they’re growing more uncertain and risks economically and politically are rising, not only in the United States, but really in countries around the world and on an international basis.

Sean Brazney: Getting into our issues with gold and silver, silver predominantly, October was an amazing month in the precious metals market. I want to highlight silver. Some things were going on in the silver market. You hear about shortages and I always love to have you on here, because you got the data in regards to real shortages out there in the marketplace. But we saw some issues going on with London, the spot price in the metals market getting way above the contract delivery price, shortages being brought up in conversations online again, and this really started to affect the price. I’m really wondering what you have to say about the inner workings of how all that played out.

Jeffrey Christian: What we saw was really locational shortages. There’s a lot of silver out in the world, but a lot of its owned by investors who are quite happy to continue owning it. The second thing is that it’s not necessarily available to the market. So, if you look at what we saw in October was tightness in the London market and tightness in the Indian market, in Mumbai and Hyderabad, and India had been taking a lot of imports last year from London. In London, while you had a total of 790 million ounces of silver in London depositories at the end of September, about 640 million of that was tied up with ETFs. So, it was allocated to investor funds and that left only about 140 million or 150 million ounces of metal that was unallocated available to meet spot demand. Now, the forward trading doesn’t necessarily involve physical metal, but people like to have that inventory there. There are people who buy the stuff and take it and make it into electronics and jewelry and other objects. A lot of the silver comes out of London and goes to India. So, you saw a tight market in London, that took the London price to a hefty premium to New York, which allowed the arbitrage to reverse. Now, if you remember, 12 months ago, there was a reverse arbitrage and New York prices were much higher than London prices and you saw tens of millions of ounces coming into New York and into the United States and Canada from London. Now, that reversed and our estimate is that you probably seen about 45 million ounces of silver shipped back from New York back into London, because the arbitrage, the price in London was higher than the spot price in New York. You also saw metal. We don’t have the final estimates for October yet from Shanghai, but it was quite clear that metal was being shipped from Shanghai to London too. Then London was trans shipping some of it back to India or onward to India to meet the demand for physical metal in India. So, you had these locational tightnesses in London and in Mumbai and that drove the prices up there. Once the prices took off, investors, short-term and long-term investors around the world, poured into the market and they took the price to record levels.

Sean Brazney: Yeah, it was nice to see it up there and we talk about opportunities to buy and to sell. When we consider the price action that we’ve seen go to the ’53s, spot market got over 54, came all the way back to 45, I think recently in the contract, quite a swing in price. Now, the premiums are starting to edge up a little bit again on the spot market. Do you think this is going to continue for a while? Also on top of that, do you think Indian demand will continue to be robust?

Jeffrey Christian: I think you’ll continue to see Indian demand robust and I want to point out, a lot of it is investment demand and it’s investment demand in India, but also North America, and now Europe is waking up a little bit too. Our view is that it’s going to continue, because a lot of the investment demand is driven by economic and political uncertainties and those uncertainties aren’t going away and they’re not getting resolved. If anything, they’re growing more uncertain and the risks economically and politically are rising, not only in the United States, but really in countries around the world and on an international basis. That’s what’s really feeding the investor anxieties that’s causing investors to load up on gold and silver. We think that’s going to continue and possibly even increase significantly in 2026 from 2025.

Sean Brazney: One key word I want to bring up with people that are listening or watching is investor demand, that’s that outlier that can really move markets and when it shows up and stays strong, it should be a good time in the precious metals industry. So, I greatly appreciate your time, Jeffrey. I hope all of our listeners and viewers call Monex, talk to an account representative and get your free report today.