After gold, the next wave of “enormous wealth” might be in silver.

Against the backdrop of gold finally returning to $4000 last week, silver has long been quietly gaining momentum, with its price rising by over 11% since last Friday.

Ultima Markets believes that even as silver approaches this year’s highs again, its structural bull market is far from over and could very well become the next “alpha” opportunity.

The logic behind precious metals has changed: from “optional” to “essential”

To understand silver, one must first comprehend the overall logic of the current precious metals market.

The current market consensus is that precious metals are experiencing a structural long-term bull market. Its core driving force has undergone a fundamental reversal: in the past, it was not only influenced by real interest rates but also by the demand for jewelry; now, in this turbulent world, central banks’ rigid buying is replacing price-sensitive consumer demand as the dominant force in the market.

Data shows that despite high gold prices, global official demand remains strong. This “price-insensitive” buying is seen as the ultimate hedge against “black swan tail risk.” The market predicts that following the current trend, the medium-term target for gold prices may even reach the $5000 mark.

This logic is crucial for silver.

Historically, silver has often been viewed as “high-beta gold.” As central bank buying continuously raises the floor for gold, the upside potential for silver is fully opened up. More importantly, compared to gold, silver faces an even more severe physical shortage.

Extreme scarcity of physical metal: the truth behind soaring lease rates

“Shortage” is the most accurate description of the current silver market.

If you look closely, you will notice that recent silver lease rates have shown a rare spike. In financial markets, this is a very strong signal—it means that physical metal is extremely scarce. Because they can’t buy or afford spot silver, many industrial users are forced to turn to the leasing market, thereby pushing up lease costs.

From the supply and demand balance sheet, net balance after deducting ETF demand is currently at its tightest level on record. Even considering the incremental supply from mining, it is far from enough to cover the demand gap. Based on this extreme supply-demand situation, silver prices are expected to hit $60 per ounce by 2026.

(With silver approaching this year’s peak, source: Ultima Markets MT5)

Delivery months approaching: a potential “short squeeze” crisis

If long-term shortages are slow variables, then the current “inventory crisis” is the fuse about to ignite the market.

As December and January—two traditional major delivery months for futures—are approaching, the market is facing enormous physical pressure.

Chinese inventories bottoming out: Shanghai Futures Exchange (SHFE) silver inventories have recently dropped to their lowest levels since 2015, and inventories at the Shanghai Gold Exchange (SGE) are also at a nine-year low. Without adequate replenishment, there’s a risk that inventory could be depleted within two months.

Export surge: Data shows that China’s silver exports in October exceeded 660 tons, setting a new record. This batch of silver was urgently shipped to London to alleviate supply tensions in overseas markets.

Overseas liquidity drying up

Despite Chinese supplies, freely available inventories in the London market remain at extremely low levels

This creates a dangerous situation—many contracts on paper, but little silver in warehouses. COMEX open interest significantly decreases before the delivery date, indicating that shorts dare not hold positions through holidays; the pressure of physical delivery forces shorts to retreat.

Price feedback: Chinese premiums pulling global prices

Currently, Chinese silver prices (mainly affected by physical shortages) continue to be higher than international markets. This high “premium” state is forcing global prices upward.

As long as China is willing to pay higher premiums, physical silver worldwide will flow continuously into the places of most urgent need, thus draining liquidity from international markets. When inventories in London and New York further decline, prices will have no choice but to rise.

In summary, silver is currently in a typical phase of “high volatility, intense in both directions.”

Physical tension, delivery pressure, price differential signals—the necessary conditions for silver to hit new historical highs are already in place. Although this process may come with intense fluctuations, as long as the underlying logic of physical shortages does not change, the upward trend for silver will continue.

For investors, compared to the already highly priced gold, this might be the “expectation difference” worth paying attention to over the next two years.

Disclaimer

Comments, news, research, analysis, price, and all information contained in the article only serve as general information for readers and do not suggest any advice. Ultima Markets has taken reasonable measures to provide up-to-date information, but cannot guarantee accuracy, and may modify without notice. Ultima Markets will not be responsible for any loss incurred due to the application of the information provided.