The Dynamics of the Silver Market: A Fundamental Revaluation
Silver prices have recently crossed the USD 61 per troy ounce mark, setting new nominal all-time highs—a development that many mainstream analysts largely missed. This upward momentum is not a fleeting event but the result of deep structural forces in the global market. As highlighted in earlier analyses, persistent supply deficits are colliding with accelerating industrial demand and a fundamental shift in investor behavior.
1. Diminishing Availability of Physical Silver
Arguably the most critical factor is the acute shortage of readily available physical metal. While total holdings in LBMA vaults may appear high, most of this metal is allocated to specific parties. The key metric is the freely available supply, often called the “Free Float” or registered silver on the COMEX. Gregor Gregersen, CEO of Silver Bullion, emphasized this in his latest newsletter, warning about the disparity between paper claims and physical backing.
Gregor Gregersen (CEO Silver Bullion und The Reserve) mit Nils Gregersen (Geschäftsführer Spargold GmbH) im wahrscheinlich größten Silbertresor der Welt, in The Reserve in Singapur
"Recent credible estimates placed the LBMA silver free float as low as about 200 million troy ounces, which is roughly 14 months of global silver deficits," Gregersen stated. This imbalance has led to phenomena like the recent "Silver Squeeze" and exceptionally high lease rates (exceeding 100% in October), signaling a genuine shortage. The Silver Institute corroborates this trend: the cumulative global deficit over the past four years, primarily driven by solar demand, totaled 678 million ounces.
Other experts share this perspective. Analysts at Commerzbank also point to the strongly increasing industrial demand, particularly from the photovoltaic sector (currently over 230 million ounces per year), as a primary price driver that chronically exceeds supply. A structural deficit for the fifth consecutive year is, according to the Silver Institute and other sources, undeniable.
2. The Vote of No Confidence in "Paper Silver"
For decades, bullion banks relied on a highly leveraged system, issuing far more paper claims (unallocated metal) than the physical metal required for backing. This game of trust is now starting to break down. More industrial users and investors are explicitly requesting allocated physical metal, not just synthetic exposure.
This trend further shrinks the "Free Float," creating shortages for all remaining participants. Gregersen describes a self-reinforcing cycle: "Many [industrial users] are now pre-emptively taking delivery—reducing free float further and potentially creating a self-reinforcing cycle." Given this tightening, rising spot prices become the primary market mechanism to reconcile physical constraints with outstanding obligations.
3. Increased Public and Institutional Awareness
The third contributor is the rising media visibility and public interest in silver's structural deficits, its irreplaceable role in industrial applications, and its historically low price relative to gold. Investment experts at UBS and Bank of America also maintain a positive outlook, fueled by a softer US dollar and continuous ETF inflows, reflecting growing institutional attention.
This broader awareness brings new groups of buyers into the market, which further strengthens demand. Indeed, when adjusted for inflation, silver's all-time high price is equivalent to about USD 215 per troy ounce. This highlights the immense upward potential compared to the current price.
Summary: The Path Forward
The convergence of diminishing free physical reserves, the shift from paper to physical silver, and heightened market visibility creates a fundamentally bullish outlook for silver. The "cat is out of the bag" scenario, as Gregersen puts it, appears to be unfolding. The structural deficit, which the Silver Institute forecasts to persist through 2026, underpins the argument that higher prices are necessary to restore market balance.
Your Strategy in a Tight Market: Precious Metals as an Anchor
In times of rising geopolitical risks, global debt levels, and increasing strain on paper-based financial systems, physical hedging gains paramount importance. While silver exhibits unique dynamics due to its industrial demand, Gold and Platinum offer a valuable complement to the portfolio.
Physical precious metals serve as the ultimate defense against counterparty and inflation risks, as they exist outside the traditional financial system. The addition of gold and platinum, historically superb stores of value, allows for broader risk diversification. At Spargold, we offer you the opportunity to securely and fully allocated store physical silver, gold, and platinum. Secure your stake while the physical supply—even in a tightening market—is still relatively accessible. As Gregor Gregersen notes: "It is still a good time to acquire physical silver."
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Your Nils Gregersen