Silver prices soared from $40 to $64, an increase of 110%. Behind this seemingly rational rally lies a crisis of futures squeezing, a surge in physical delivery, and a breakdown of trust in the paper system. As global capital shifts from financial assets to physical assets, liquidity is giving way to certainty.
(Background: Why Is Silver Growing More Dangerous? A Leveraged Market Play Without Central Bank Backing)
(Additional context: Silver surpasses $63 and hits a new all-time high! Up over 100% this year, far exceeding gold and Bitcoin. Will it challenge the $100 mark next year?)

Table of Contents

• The crisis behind the rally
• Futures squeezing
• Who is market making?
• The gradual failure of the paper system
• Liquidity is giving way to certainty

When the music stops, only those holding real gold and silver can sit safely. In December, the spotlight in the precious metals market is not gold, but silver — that glaring light.

From $40, it jumped to $50, $55, $60, passing through one historic level after another at an almost uncontrollable speed, barely giving the market time to breathe.

On December 12, spot silver briefly hit a historic high of $64.28 per ounce, then sharply plummeted. Since the start of the year, silver has risen nearly 110%, far surpassing gold’s 60% increase.

This rally appears “extremely reasonable,” but it also makes it especially dangerous.

The crisis behind the rally

Why is silver rising?

Because it looks worth it.

According to mainstream explanations, all of this is reasonable.

The Fed’s renewed rate cut expectations reignite the precious metals rally, recent soft employment and inflation data, and market bets on further rate cuts in early 2026. As a highly elastic asset, silver reacts more intensely than gold.

Industrial demand is also fueling the rise. Explosive growth in solar energy, electric vehicles, data centers, and AI infrastructure fully reflects silver’s dual nature (precious metal + industrial metal).

Global stockpiles continue to decline, worsening the situation. Mine production from Mexico and Peru in Q4 fell short of expectations, and silver bars stored in major exchanges’ warehouses are decreasing year over year.

……

If these were the only reasons, silver’s price increase would be a “consensus,” even a delayed revaluation.

But the danger lies in the story:

Silver’s rise seems rational but is not solid.

The reason is simple: silver is not gold; it lacks the same consensus and “national backing.”

Gold remains resilient because central banks worldwide are buying. Over the past three years, global central banks have purchased more than 2,300 tons of gold, which is reflected on their sovereign balance sheets as a sign of creditworthiness.

Silver is different. While global gold reserves exceed 36,000 tons, official silver reserves are almost zero. Without central bank support, during extreme market volatility, silver lacks any systemic stabilizer — it’s a classic “island asset.”

Market depth is even more starkly contrasted. Gold has a daily trading volume of about $150 billion, while silver’s is only $5 billion. Comparing gold to the Pacific Ocean, silver is more like Poyang Lake.

It has a small size, few market makers, insufficient liquidity, and limited physical reserves. Most importantly, silver’s main trading forms are not physical but “paper silver” — dominated by futures, derivatives, and ETFs.

This creates a dangerous structure.

Shallow waters are prone to capsizing; large capital inflows can suddenly stir the entire surface.

And this is precisely what has happened this year: a sudden influx of capital pushed a shallow market rapidly upwards, disconnecting prices from reality.

Futures squeezing

What drives silver prices off course is not the seemingly solid fundamentals but a price war in the futures market.

Under normal circumstances, spot silver should trade slightly above futures prices. This makes sense because holding physical silver involves storage costs and insurance, while futures are just contracts, naturally cheaper. This price difference is called “spot premium.”

But starting in Q3 of this year, this logic was inverted.

Futures prices began to systematically trade above spot prices, with the gap widening. What does this mean?

Someone is wildly pushing futures prices higher. This “futures contango” typically only appears in two situations: either market optimism about the future is extreme, or someone is forcing a short squeeze.

Given that silver’s fundamentals are improving gradually — photovoltaic and new energy demand won’t surge exponentially in a few months, and mine output won’t suddenly dry up — the aggressive futures performance more resembles the latter: capital is pushing futures prices up.

Even more dangerous signals come from abnormalities in the physical delivery market.

Data from the world’s largest precious metals exchange, COMEX (New York Mercantile Exchange), show that the proportion of physical delivery in precious metal futures contracts is less than 2%, with the remaining 98% settled via cash or contract rollover.

However, in recent months, COMEX’s silver physical delivery volume has surged, far exceeding historical averages. More and more investors are losing faith in “paper silver” and are requesting physical silver bars.

Similar phenomena are occurring with silver ETFs. Large inflows of capital are accompanied by some investors redeeming shares to obtain physical silver rather than ETF units. This “run” on ETFs puts pressure on their silver reserves.

This year, three major silver markets — NY COMEX, London LBMA, and Shanghai Gold Exchange — have experienced run-offs.

Wind data shows that in the week of November 24, silver inventory at the Shanghai Gold Exchange fell by 58.83 tons, to 715.875 tons — a new low since July 3, 2016. COMEX silver inventory dropped from 16,500 tons in early October to 14,100 tons, a 14% decrease.

The reason is straightforward: during a US dollar rate-cutting cycle, traders are reluctant to settle in dollars. An invisible concern is that exchanges might not have enough silver available for delivery.

The modern precious metals arena is a highly financialized system, where most “silver” is just digital entries. Actual silver bars are repeatedly mortgaged, leased, and embedded in derivatives worldwide. An ounce of physical silver might correspond to a dozen different rights certificates.

Senior trader Andy Schectman, taking London as an example, notes that LBMA has only 140 million ounces of floating supply, but daily trading volume reaches 600 million ounces. Within this 140 million ounces, over 2 billion ounces of paper claims exist.

This “fractional reserve system” usually functions well, but if everyone suddenly demands physical silver, the whole system could face liquidity crisis.

When the shadow of crisis looms, strange phenomena tend to occur in financial markets — colloquially called “disconnecting the network.”

On November 28, CME experienced an almost 11-hour outage due to “data center cooling issues,” setting a record as the longest outage in history, preventing proper updates of COMEX gold and silver futures.

Remarkably, the outage happened at a critical moment when silver hit a record high, with spot silver breaking through $56, and futures surpassing $57.

Market rumors speculated that the outage was to protect market makers exposed to extreme risks and potential large losses.

Later, data center operator CyrusOne stated that the disruption was due to human error, fueling various “conspiracy theories.”

In short, this type of futures-driven squeeze market is inherently volatile. Silver has essentially shifted from a traditional hedge asset to a high-risk target.

Who is market making?

In this story of squeezing, one name cannot be avoided: JPMorgan Chase.

The reason is simple: it is widely recognized as the silver market maker.

Between at least 2008 and 2016, JPMorgan manipulated gold and silver prices through trader actions.

Their approach was straightforward: place large buy or sell orders in futures markets to create false supply and demand signals, induce other traders to follow, then cancel orders at the last second to profit from price movements.

This tactic, known as “spoofing,” led JPMorgan to pay a $920 million fine in 2020 — a record penalty by CFTC at the time.

But the market manipulation was not limited to this.

JPMorgan, on one hand, lowered silver prices through massive short selling and spoofing in futures markets; on the other hand, it accumulated physical silver at artificially low prices.

Starting around 2011, when silver approached $50, JPMorgan began stockpiling silver in its COMEX warehouses, supporting prices as other large institutions reduced their holdings, eventually holding up to 50% of COMEX’s total silver inventory.

This strategy exploited structural flaws in the silver market: paper silver prices dominate physical silver prices, and JPMorgan can influence both, being one of the largest physical silver holders.

So, what role does JPMorgan play in this recent silver squeeze?

On the surface, JPMorgan appears to have “reformed.” After the 2020 settlement, it implemented systematic compliance reforms, including hiring hundreds of new compliance officers.

Currently, no evidence indicates JPMorgan participated in the short squeeze, but in the silver market, it still exerts significant influence.

According to the latest CME data on December 11, JPMorgan’s total silver holdings in the COMEX system are about 196 million ounces (proprietary + brokerage), accounting for nearly 43% of the exchange’s total inventory.

Additionally, JPMorgan is also the custodian for silver ETF (SLV). As of November 2025, it holds 517 million ounces of silver, worth $32.1 billion.

More critically, in the category of “Eligible” silver (ready for delivery but not yet registered as deliverable), JPMorgan controls over half of the amount.

In any silver squeeze, the market’s real debate boils down to two points: first, who can supply physical silver; second, whether and when it can be allowed into the delivery pool.

Unlike its past role as a major silver short seller, JPMorgan now sits at the “silver gate.”

Currently, only about 30% of total silver inventory is “Registered” (available for delivery), while the bulk of “Eligible” silver is highly concentrated among a few institutions. The stability of the silver futures market essentially depends on the actions of these few nodes.

( The gradual failure of the paper system

If one phrase could describe the current silver market, it would be:

“The rally continues, but the rules have changed.”

The market has undergone an irreversible transformation, and trust in the “paper silver system” is collapsing.

Silver is not an isolated case; similar changes have already occurred in the gold market.

Gold inventories at the NY Mercantile Exchange continue to decline, with “Registered” gold repeatedly hitting lows. The exchange has had to shift gold from “Eligible” to “Registered” to facilitate settlement.

Globally, capital is quietly migrating.

Over the past decade, mainstream asset allocation has favored highly financialized assets — ETFs, derivatives, structured products, leverage tools — everything can be “securitized.”

Now, increasing amounts of capital are retreating from financial assets, seeking physical assets that do not rely on financial intermediaries or credit guarantees, with gold and silver being prime examples.

Central banks continuously and massively increase gold holdings, almost without exception in physical form. Russia bans gold exports; even Germany, the Netherlands, and other Western countries are demanding to repatriate their overseas gold reserves.

) Liquidity is giving way to certainty.

When gold supply cannot meet huge physical demand, capital begins to look for alternatives, and silver naturally becomes the first choice.

The essence of this movement toward physical is a reassertion of monetary pricing power amid a weak US dollar and de-globalization.

According to Bloomberg reports in October, global gold is shifting from West to East.

Data from CME and LBMA ###London Bullion Market Association( show that since late April, over 527 tons of gold have flowed out of the largest Western markets in New York and London, while gold imports in major Asian countries like China have increased, with China’s August imports reaching a four-year high.

In response to these changes, JPMorgan plans to transfer its precious metals trading team from the US to Singapore by late November 2025.

Behind the surge in gold and silver prices is a return to the “gold standard” concept. While this may seem unrealistic in the short term, one thing is clear: whoever controls more physical metal has greater pricing power.

When the music stops, only those holding real gold and silver can sit safely.

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