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Money Metals News Alert
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December 29, 2025
– Silver
surged above $80 an ounce last night, capping a meteoric rally that drove the
metal???s price up 176 percent over the year. Prices are 10% lower this morning.
What is driving silver higher at such
an unprecedented rate?
There are several factors.
However, one fundamental reality
dominates the silver market.
There isn???t enough silver.
This has evolved into a significant
silver squeeze, which may be ongoing despite today's pullback.
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Gold : Silver Ratio (as of
Friday's closing prices) – 56.7 to
1
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Silver Squeeze 2.0 Drives Price Over $80
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Problems started earlier
in the year when tariff worries incentivized the movement of silver out of London
vaults to the U.S. An explosion in Indian silver demand this fall was the straw
that broke the camel???s back.
Initially, Indian buyers
were primarily sourcing silver from Hong Kong, but they reportedly shifted more
toward London during the Chinese Golden Week Holiday in the first week of October.
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But London vaults were already tapped
out.
According to Bloomberg, the
amount of free float silver available in London dropped from a high of 850 million
ounces to just 200 million ounces, a 75 percent decline. Metals Focus estimates
that the available metal fell closer to 150 million ounces.
This precipitated a short squeeze.
In simplest terms, a short occurs when
somebody sells a silver contract today, committing to deliver silver at a set
price in the future with the expectation of a falling market price. If the price
drops, the investor can sell the contract and pocket the gain. But if the price
rises, the investor suffers a loss. If nobody will buy the contract, he is
obligated to deliver the silver.
This short squeeze has caused
liquidity in the London market to virtually dry up. This has driven London
benchmark prices higher at a very rapid pace, and it has caused a price gap
between New York and London. The London spot price recently shot to a $3 premium
over New York futures. The last time we saw a premium like this was during the Hunt
Brothers??? squeeze.
Meanwhile, the cost to borrow silver
overnight rose to well over 100 percent on an annualized basis.
Eventually, metals flowed back into
London, easing the squeeze, but it didn???t fix the market.
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Not Enough Silver to Meet
Demand
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The root of the problem is
simple: there isn???t enough metal to meet demand.
While shuffling silver
between London, New York, and India took the immediate pressure off the market, it
didn???t magically create new silver.
Silver
demand has outstripped supply for four straight years. The structural market
deficit came in at 148.9 million ounces last year.
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That drove the four-year market
shortfall to 678 million ounces, the equivalent of 10 months of mining supply in
2024.
The Silver Institute projects a fifth
straight supply deficit this year.
Persistent supply shortfalls have
taken their toll on above-ground stocks. According
to the Economic Times of India, ???Inventories across COMEX, London
vaults, and Shanghai have steadily declined over recent years, reinforcing
concerns about tightening physical availability.???
London Bullion Market Association
vaults have lost around 40 percent of their holdings over the last five years,
while COMEX registered inventories in the United States are down nearly 70
percent. Meanwhile, Shanghai inventories have fallen to their lowest level in a
decade.
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Today, we???re once again seeing
increasing signs of inventory problems in London...
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This week's Market Update was
authored by Money Metals Contributing Writer Mike Maharrey.
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