Post by : Badri Ariffin

Silver, often dubbed the “Devil’s metal” due to its volatile price fluctuations, has recently surged to record heights this year, exceeding $54 per troy ounce in mid-October before experiencing a brief pullback and then rallying again. This surge signifies one of the most significant market movements in decades, propelled by diminishing supplies, robust industrial demand, and a seasonal uptick in purchases from India.

The recent price increase started gaining momentum earlier this year as gold also entered a historic upswing, surpassing $4,000 an ounce. However, silver’s market — only a fraction of gold's size — has displayed far more dramatic responses. Traders have noted this period as one of the most constrictive squeezes in memory, with certain shipments even expedited via air to meet urgent delivery needs.

A Rare Peak in Five Decades

October’s peak marks only the third significant spike in silver prices over the last 50 years, joining the notable 1980 Hunt brothers’ squeeze and the rally during the debt ceiling crises of 2011. This time around, however, the pressures are stemming from a unique blend of diminished inventories, rising industrial consumption, and significant demand from India.

India’s Festive Buying Powers Price Surge

As India approaches the autumn festive season — including the major celebration of Diwali — silver demand has skyrocketed. With farmers benefiting from post-harvest proceeds, they are leaning toward metals as a traditional means of preserving wealth, leading to local silver prices hitting a record 170,415 rupees per kilogram.

India annually consumes approximately 4,000 metric tons of silver, relying largely on imports. However, key suppliers like the U.K. are facing dwindling stock levels, with London vaults decreasing from over 31,000 metric tons in 2022 to merely 22,000 metric tons this year — a record low.

Vaults Depleting and Borrowing Costs Hitting Records

Simultaneously, a dramatic squeeze has been unfolding behind the scenes. Traders have noted that availability of silver in key markets has become so restricted that short-term borrowing rates briefly skyrocketed to 200% on an annualized basis. Many market players rushed to close out their positions as liquidity tightened across trading platforms.

Industrial Demand Ignites Further Interest

While jewelry remains a primary demand driver, silver's industrial applications are rapidly expanding. Its use in electric vehicles, solar technology, AI hardware, and other innovations is elevating its profile within the market. Standard electric vehicles currently utilize about 25–50 grams of silver, but emerging solid-state silver batteries may require up to a kilogram per vehicle, raising long-term supply stability concerns.

According to the latest data from the Silver Institute, global mine production has been on the decline for the past decade, particularly across Central and South America. As consumption surges and stockpiles dwindle, the market is transitioning from surplus to deficit — a shift that could keep prices elevated for the foreseeable future.

A Metal at the Crossroads

Silver currently occupies a unique position: valued simultaneously as a precious metal and a crucial industrial commodity. As worldwide electrification accelerates and inventories continue to diminish, this year’s sharp price increase signifies not just a seasonal jump but a fundamental shift in global demand and supply dynamics.

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