Incredible Week In The Gold And Silver Markets

It's been an absolutely incredible week in the gold and silver markets, with U.S. retail demand skyrocketing as gold zoomed over $4,000 per ounce and silver broke out above its all-time $50 high. The momentum in these markets has been increasing -- and so have dislocations across the globe.

As of this Friday late morning recording gold is up 5.0% or $200 to come in at $4,233, and that’s even after more than a $100 pullback here today.

Silver meanwhile is also pulling back sharply here today, finally, and checks in at $51.85, good for a 2.9% advance for the week – even despite a pretty significant pullback here on Friday.

If gold and silver can hold onto these weekly gains over the final few trading hours of the week this will mark the 9th consecutive weekly gain for both metals. Truly remarkable.

As for the PGMs, they too are pulling back rather massively here today with both suffering triple digit dollar drops as of this recording. However, at this moment platinum is still up 0.9% on the week to trade at $1,623. Palladium is up 5.3% to come in at an even $1,500.

Again, all these markets are pretty volatile here today, so who knows where they will settle the week in a few hours once most of you are actually listening to this podcast.

Now our listeners may already know that one of the reasons for silver’s surge to record levels in recent days has been a shortage of available silver in London. And that shortage, at least most recently, has been triggered by some extremely strong silver demand in India.

India’s silver market reveals deep structural problems indicative of the broader global market.

Simply put, there isn’t enough silver. And risks of a major blow up are mounting.

Demand for silver in India began to surge earlier this year after the white metal zoomed to new all-time highs in rupee terms.

With growing investor interest in silver during an environment when gold seems pricey, a silver supply shortfall in India also sent the price to a significant premium locally.

Supply simply hasn't been able to keep up with demand in that part of the world.

Initially, Indian buyers were primarily sourcing silver from Hong Kong, but they reportedly shifted more toward London over the past few weeks. This has exacerbated the silver shortage in London.

The free float of immediately available silver in London was already down by over 75 percent, thanks to a recent explosion in silver ETF demand from retail and institutional investors. Large silver shipments to the U.S. earlier this year, due to traders taking advantage of an arbitrage opportunity which resulted from worries about tariffs, have exacerbated this situation.

In recent days, Indian traders have been desperately trying to get their hands on metal wherever they can -- with many caught short and without physical silver available to meet commitments. At least a couple major silver funds in India halted acceptance of new investors, citing a lack of metal. However, other investment vehicles are still accepting new funds, raising worries they might be unable to source the needed metal.

Meanwhile, Money Metals Exchange just arranged a large shipment of 1,000-ounce silver bars from the U.S. destined for India via Dubai.

Bullion banks are engaged in similar operations, standing for delivery of silver on the COMEX and airlifting silver bars to Europe and beyond.

However, there is an unusual anomaly in the Indian market. MCX futures are trading substantially below the street price. Businessworld said this isn’t a "small kink... It’s a gaping hole in India’s precious metals market — and it’s getting wider.”

One analyst is saying this isn't just normal market stress. It’s a signal that someone, somewhere, can’t deliver metal. Overnight financing rates for silver have skyrocketed, further squeezing some market participants.

Taking a step back, remember that the global silver market is on track for its fifth straight structural market supply deficit.

Global demand outstripped the silver supply for the fourth consecutive year in 2024. The structural market deficit came in at roughly 149 million ounces. That drove the four-year market shortfall to 678 million ounces, the equivalent of 10 months of mining supply in 2024.

Meanwhile, the Silver Institute projects a fifth straight supply deficit this year.

When miners can’t produce enough metal to meet demand, users must source silver from existing above-ground stocks. But to entice people to let their silver go, the price may need to rise.

Last year, there was record industrial demand for silver, but investment demand was tepid. But as the price neared record levels this year, investment demand has surged as well, stressing the market close to a breaking point. And as Businessworld put it, “Globally, silver inventories are collapsing.”

Concerns of a silver shortage seems to have turned the physical silver market in some parts of the world into a “feeding frenzy.” And trust appears to be breaking down, with more and more players in the paper silver market getting worried it could be hard to get their hands on the metal they think they own.

We could see easing pressure in the upcoming weeks as metal moves to the areas of highest demand, but there is no easy fix for the underlying problem... except perhaps, even higher prices.

Time will tell if India is the straw that has finally broken the silver camel's back. But silver's breakout above its epic 45-year high of $50 is certainly a major event in the precious metals market – and so is the strong reaction from retail investors. What happens from here is unknown, but you can be sure we'll be watching closely and reporting on what we see.

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