Loading ...I wondered if calls for delivery by paper traders who sold what they didn’t have to draw down the price had anything to do with the pressure to make more although I didn’t put it that way and yes it is having a effect combined with a plethora of other things. Declining grade. Peak silver?
. Delivery calls deplete physical inventory
- Futures market pressure: A call for delivery occurs when a trader on a futures exchange, such as the COMEX, demands physical metal instead of cash to settle their contract.
- Inventory drawdown: While some claims of exploding delivery volumes have been fact-checked and found to be exaggerated, physical silver delivery demand has been consistently high, putting pressure on existing inventories. As traders take physical possession, the pool of silver available in major vaults shrinks.
2. Supply deficit creates market stress
- Multi-year imbalance: Global silver demand has outstripped supply for several consecutive years, consuming existing surpluses.
- Mining limitations: The structural deficit persists because roughly 70% of silver is a byproduct of mining other metals, like copper and lead. This makes it difficult for producers to increase output quickly in response to higher silver prices.
- Declining grades: Compounding the issue are declining ore grades at existing mines, which require more ore processing for the same amount of silver output
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. Investment demand surges amid uncertainty
- Safe-haven appeal: During periods of economic uncertainty, inflation, and geopolitical tension, investors flock to precious metals like silver as a safe haven.
- Increased physical buying: Investment demand for physical silver, particularly bars and coins, has been exceptionally strong. Analysts project that investment demand will rise sharply and push prices to record levels.
- silver-backed Exchange-Traded Funds (ETFs) has increased dramatically, forcing custodians to buy more physical silver to back new subscriptions.
4. Industrial demand remains robust
- Green energy transition: Unlike gold, over 50% of silver’s annual demand is for industrial uses. It is a critical component in green technologies, such as solar panels and electric vehicle batteries.
- 5G and electronics: The expansion of 5G infrastructure and demand for modern electronics further drives silver consumption, as it is a crucial electrical conductor.
- Relatively inelastic: Industrial demand for silver is relatively inelastic in the short term, meaning manufacturers will continue buying even at higher prices to avoid production disruptions.
5. Higher premiums reflect tightness in physical supply
- Premiums for bars and coins: The scarcity of physical silver has caused premiums—the amount over the spot price—to rise for bars and coins.
- Geographic price divergence: Tightness in the physical market has caused prices to diverge geographically. For example, traders have been air-freighting silver from Western vaults to Asian markets, where premiums are even higher.
Ultimately, these factors all contribute to the need for refiners and mints to make more silver bars and coins to meet both investment and delivery demands