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Posted on 11/29/2025 9:08:54 AM PST by delta7
New York futures out of action probably doesn’t help. But silver hits new highs in volatile conditions. In this report, we look at the factors driving gold and silver higher still.
During Thanksgiving week (US markets closed on Thursday) the bullish running has been made in Asia. In European trade this morning, gold was $4,173, up $90 from last Friday’s close. Silver at $53.85, up $3.87 on the same time scale was making the running. Overnight in Shanghai, spot silver spiked as high as $55.13 surpassing previous highs, and the February future closed at $56.
The situation is complicated by Comex trading halted overnight, it is said due to cooling issues at a data centre. It may or may not have contributed to silver spiking higher. But the real problem in markets is an acute shortage of deliverable silver.
So far this year, 12,834 tonnes have been stood for delivery. As a source of silver bullion, Comex exceeds the combined output of Mexica, China, Peru, and possibly Chile — the world’s four largest producers. We don’t know how much of this is no longer available in the form of market liquidity, but with liquidity clearly stretched it will require higher prices, probably far higher to find out.
The chart below, which shows the relationship between the silver price and open interest encapsulates the problem.
Particularly since the beginning of this year, while silver has been rising open interest has declined. In a reversal of normal supply and demand relationships as the price rises, selling dries up. Normally, we look at speculator activity on the buy side to drive prices. But instead, there is a growing reluctance of sellers to supply additional futures contracts to buyers. That is why speculator interest is declining presumably with quotes widening, despite an obvious bullish momentum which normally attracts hedge fund interest.
The problem is not confined to Comex, with persistent backwardations between London spot and Comex futures, which have only disappeared since the March contract has become active. An additional difficulty for New York and London is that demand is increasing in China, with silver on the Shanghai Futures Exchange (SHFE) closing at $56 for the February contract while bullion stocks in the SGE and SHFE have declined to dangerously low levels. SHFE open interest and volumes are telling the same story as western paper markets, both of which still appear relatively subdued despite a soaring silver price:
Normal supply and demand analysis inadequately explains the situation in silver. After years of price suppression, evidenced by global supply deficits relative to increasing industrial demand, there is a dawning of the consequences. Worse for industrial users long accustomed to cheap supplies, silver has the characteristics of a Giffen good, where a rising price creates further scarcity: the scarcity being the “investor category”, in the Silver Institute’s annual surveys no longer prepared to cover supply deficits from industrial demand.
There is a similar situation in gold, as the next chart of the price and Comex open interest demonstrates:
There have been three phases of the relationship. As the price rallied in the first quarter, speculative interest boomed. That was when it was thought that the newly elected President Trump would impose trade tariffs on US gold imports. Gold then consolidated for about five months while speculative interest declined, only picking up briefly when gold broke out above its consolidation phase. But in late-September, open interest began to decline despite a rising price.
Clearly, gold is not being driven by speculators, but by the paper gold establishment’s attempts not to get caught short.
Gold is a far larger market than silver, but like silver it looks like becoming a Giffen good, as a rising price deters selling and at the margin attracts buyers who are missing out. What it tells us about the relationship between metallic money and fiat currencies is ringing alarm bells. But that topic is beyond a precious metals market analysis.
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One of my chief problems with precious metals as a store of value is that investing in them takes wealth out of production; IOW this is one of the more perverse consequences of inflationary expectations. When one adds the anticipation of a real capital gain onto that, the effect is a runaway market (the Giffen good).
What it tells us about the relationship between metallic money and fiat currencies is ringing alarm bells. But that topic is beyond a precious metals market analysis.
There are two aspects to wealth. Earning it and storing it.
Some are focused on earning it, others have the luxury of wondering where to store it.
One of the unspoken risky investments of where to store is in people. Investing in people is a very risky/high reward but should be part of every portfolio.
When times get tough you are going to need people in your life.
Eh, not exactly a Geffen good. Gold and silver are hardly staples like bread or rice. And while people are buying more as the price rises, it’s because of fear of missing out on the upward ride, not necessity.
More of a bandwagon effect than Geffen.
I’m thinking this run up may force countries to actually back currencies with stuff. I’m in favor of hard goods backing currency. Have on hand the gold, silver, oil, fresh wheat, etc. that actually represent the value of the paper or electrons.
That would keep governments honest.
Ag up 95% this year. I have whiplash.
Ag up 95% this year. I have whiplash.
Speaking of AG, I’ve been holding First Majestic Silver Corp (AG) for a while waiting for it to get some attention (up almost 13% on Friday). Finally, the stock is going up. It should be a $30 stock. The same goes for SVM (Silver Corp Metals). I’ve been holding it since it was at $2.50.
Ag up 95% this year. I have whiplash
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This is a generational Bull market, it is just warming up. Wait till all the paper and electron people jump in.
Industry demands Silver, no matter the price.
I think it’s a waste of time owning gold or silver. Can’t easily sell it or trade for something you might need.
did you happen to notice silver appreciated 95% year-to-date?
“Hahaha. Your side of the boat is sinking...”
Demand by industry does not increase as price increases.
Silver production vs. demand has been in outright deficit for 7 years. Its probably been longer if you count people melting-down grandma’s silverware, and governments reducing stockpiles.
Facing the hard reality of real supply and demand, at some point, price suppression through futures would no longer work.
I believe we are at that point. The cupboards are officially empty.
So many good silver miners available today.
By that logic, why buy/invest in stocks? Or US government bonds? Or oil futures? Or a condo in New York?
All of these things can not be directly bartered for the basic necessities of life. Our printed, fiat, Federal Reserve money is the intermediary and medium of exchange for all of it. Silver and gold, even have a slight advantage as you CAN trade a silver/gold coin for the necessities of life if TSHTF
CDE is my odds on favorite right now.
A strong balance sheet, record earnings, recent acquisition of NewGold, it’s been flying high, and will continue, in my opinion.
My gold and silver was lost in a boating accident 25 years ago.
Gold and silver are legal tender in the USA.
Gold and silver are depression hedges for me. They don’t compare to real investments like stocks in which people go to work every day to make you more money. Silver and gold literally just sit there. Yah, you can trade them. And their value in paper currency tells you something about the relative value of paper currency. But they don’t EARN anything. They literally just sit there.
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