Silver Supply Crisis Deepens as London Inventories Plunge 33%

A historic silver squeeze is unfolding across global markets - one that analysts say could reshape the precious metals landscape for years to come. Prices have surged past $50 per ounce, vaulting silver into territory reached only once before in history. This is not a speculative anomaly but a convergence of structural factors that together point to a profound, global shortage.

• Persistent supply deficits: For several consecutive years, global silver demand - exceeding 1.16 billion ounces annually - has outstripped mine production and recycling, leaving a cumulative deficit nearing 800 million ounces since 2020.

• Reduced mine output: Around 70% of silver is mined as a byproduct of base metals like copper and zinc, limiting production flexibility.

• Depleted inventories: London's silver vaults - the world's largest repository - have seen available stockpiles plunge 33% since mid-2021, leaving an estimated 200 million ounces of "free float" silver, down from 850 million in 2019.

• Explosive investment demand: Investors worldwide are turning to silver as confidence in fiat currencies wanes and inflation expectations rise.

• Indian buying surge: India's silver imports have spiked dramatically as buyers shift away from Hong Kong suppliers, further tightening global availability.

• Geopolitical fears: Uncertainty surrounding potential U.S. tariffs on silver imports following a Section 232 investigation is adding volatility to an already strained market.

The crisis is most visible in London, the historic center of global precious metals trade. Traders are now air-freighting silver bars across the Atlantic to exploit massive premiums - an extraordinary step typically reserved for gold.

See also - USA Sends Silver Bars to London as Historic Squeeze Hits

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According to the London Bullion Market Association (LBMA), member banks and refiners are "actively monitoring tightness in the silver market." Liquidity has all but evaporated - banks hesitate to quote prices, and traders short on silver are struggling to source physical metal to meet contractual delivery.

One logistics executive confirmed traders are attempting to relocate between 15-30 million ounces of silver from New York's COMEX vaults to London to satisfy demand and arbitrage opportunities.

The London silver auction, established in 1897, recently recorded trades above $50 for the first time ever, approaching the all-time high of $52.50 set during the 1980 Hunt Brothers episode.But unlike the 1980 squeeze - which stemmed from a speculative corner - today's rally is rooted in genuine structural imbalances.

Market veterans call this a "perfect storm" of under-supply, industrial expansion, and monetary flight:

• Industrial demand from solar panels, electric vehicles, and advanced electronics continues to rise sharply.

• Silver's use in photovoltaic technology - essential to the green energy transition - now represents over 25% of total demand.

• COMEX inventories in the U.S. are thinning as well, with dealers reporting months-long delivery delays and widening premiums for physical metal.

Unlike 1980, no regulatory "fix" can resolve this crisis. Today's squeeze stems from real scarcity, not excessive speculation. The imbalance can only be corrected through increased mine output - something analysts warn may take years to rebalance, given the metal's dependence on base-metal mining.

• Industrial Impact: Manufacturers may face rising costs and potential production delays for solar, electronics, and medical applications.

• Investor Impact: Physical silver premiums are widening, while ETFs and futures markets face delivery pressure.

• Monetary Impact: As gold prices soar and fiat confidence erodes, silver's traditional monetary role is re-emerging - echoing dynamics not seen since the 1970s.

The silver squeeze unfolding in 2025 is not a replay of history - it's a global re-pricing of a critical industrial and monetary metal.With inventories collapsing, borrowing rates soaring, and demand accelerating, the world is witnessing what could become the most significant silver supply crisis in modern times.

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