All that Glitters is not Gold

Silver’s rally in 2025 has been nothing short of extraordinary. Prices have climbed close to 70% in US dollar terms and about 75% in Indian rupees, with spot silver surpassing the $50 per ounce mark—a level unseen for decades. In our earlier note in June 2025 (link here), we had outlined a constructive view on silver, supported by persistent supply deficits and growing industrial demand. The developments over the past few months appear to have validated much of that thesis, though the speed and scale of the move have exceeded expectations. The market now trades at a rare premium to COMEX futures, a signal that the physical side of the market has grown exceptionally tight and, perhaps, a little stressed by its own momentum.

A Shift in Where the Metal Sits

The global silver ecosystem has been quietly reshaped over the past few years. London, long the cornerstone of physical trade, has seen its vault holdings drawn down steadily, while inventories in New York have swollen.

So far this year, roughly 6,562 tonnes of silver have moved from LBMA vaults to COMEX, taking COMEX inventories to an all-time high of 16,485 tonnes. LBMA holdings, by contrast, have slipped to 24,572 tonnes, shrinking the ratio of London to New York stocks from 2.6 at the end of 2024 to 1.49.

There are many explanations—logistical shifts, trade policy uncertainty, and regional hedging needs among them—but the net result is the same: metal that once sat quietly in London now sits elsewhere and getting it back may take time.

Investment Demand Tightens the Screws

Investor participation has amplified the squeeze. The top 10 physically backed silver ETFs have seen seven straight months of inflows, taking total holdings to 28,144 tonnes, their highest since mid-2022. Around 65% of London’s silver is now linked to ETF storage, up from 57% at the start of the year. The amount of unencumbered metal—what traders call the “free float”—has shrunk dramatically, from over 26,000 tonnes in 2019 to just 6,200 tonnes today.

Markets often move fastest when availability narrows just as interest broadens, and silver has followed that familiar pattern.

India’s Seasonal Pull

India’s role has been quietly significant this year. Ahead of Diwali, September imports touched 800 tonnes, bringing the year-to-date total to over 4,000 tonnes, about 10% higher than the five-year average. While India’s buying tends to be cyclical, it has arrived this year into a market already short of comfort, adding to the sense of tightness globally.

The Premium Tells Its Own Story

London prices now trade about $2 per ounce higher than New York—a rare inversion, last seen during the most turbulent periods of the past. Liquidity in forward markets has thinned, and lease rates have surged to a record 39% annualized, reflecting how difficult it has become to source physical metal for delivery.

Such conditions rarely sustain indefinitely, but they often persist longer than participants expect.