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Silver market backwardation. Why?

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So we all watched a month ago as the LBMA ran short on silver. Some pundits called it backwardation. Others said that LBMA and COMEX were fundamentally different products and therefore it wasn't. Well, the past 3 days have quashed any doubt. December delivery on the COMEX is well above delivery in 2026. Nobody can deny the silver market is in backwardation now.

 

On the TFEX, we see December 2025 silver (SVFZ25) consistently above March 2026 silver (SVFH26) by about 0.25% - 0.5%. It's been this way for several days. My question to the experts is "why?"

 

I know the canned responses. There is a scarcity in immediate supply, possibility of a short squeeze, etc. Honestly I don't see an actual scarcity in the real world. Delays on purchasing silver from Bowin are actually shorter now than in weeks past. But my confusion is why do people think that if there is a shortage now, why is going to ease? Refineries are running flat out. You can't spin up any kind of new supply by March.

 

And as for the future, China is going to stop all exports of silver on Jan. 1, putting even further pressure on supply. The appetite for silver by industry and governments appears insatiable. Even the US added it as a critical mineral, allowing agencies to stockpile. So why should March delivery be any less? A rudimentary analysis implies the price should be higher in March, due to ever increasing demand and continually shrinking supply. So why backwardation?

 

It just seems counterintuitive. Nothing is going to fix silver in the short term (< 12 months). Unless there is some mechanism I'm not considering that is going to force prices down. I know the large banks keep trying to suppress the price, but the movements over the last 3 months show that simply isn't working anymore.

 

Anyone have any thoughts on why we're not seeing contango right now?

Up and up it goes. Silver's rise is inevitable. 

Historically silver has always had a higher purchasing value than it's been for the past 80 years or so.

21 hours ago, uncletiger said:

So we all watched a month ago as the LBMA ran short on silver. Some pundits called it backwardation. Others said that LBMA and COMEX were fundamentally different products and therefore it wasn't. Well, the past 3 days have quashed any doubt. December delivery on the COMEX is well above delivery in 2026. Nobody can deny the silver market is in backwardation now.

 

On the TFEX, we see December 2025 silver (SVFZ25) consistently above March 2026 silver (SVFH26) by about 0.25% - 0.5%. It's been this way for several days. My question to the experts is "why?"

 

I know the canned responses. There is a scarcity in immediate supply, possibility of a short squeeze, etc. Honestly I don't see an actual scarcity in the real world. Delays on purchasing silver from Bowin are actually shorter now than in weeks past. But my confusion is why do people think that if there is a shortage now, why is going to ease? Refineries are running flat out. You can't spin up any kind of new supply by March.

 

And as for the future, China is going to stop all exports of silver on Jan. 1, putting even further pressure on supply. The appetite for silver by industry and governments appears insatiable. Even the US added it as a critical mineral, allowing agencies to stockpile. So why should March delivery be any less? A rudimentary analysis implies the price should be higher in March, due to ever increasing demand and continually shrinking supply. So why backwardation?

 

It just seems counterintuitive. Nothing is going to fix silver in the short term (< 12 months). Unless there is some mechanism I'm not considering that is going to force prices down. I know the large banks keep trying to suppress the price, but the movements over the last 3 months show that simply isn't working anymore.

 

Anyone have any thoughts on why we're not seeing contango right now?

Puzzeling indeed. I can only conclude that the physical demand of Silver must be great. = I want my Silver today and not next March. (Some magical vacuum cleaner sucking up physical Silver??????) The re-incarnation of the Hunt brothers?

 

I am meeting people that never talked about Silver before. Now they do. That worries me. For over a month, there was no meaningful technical "correction" of Siver, the slightest "dip" causes immidiate buying interest. 

 

Very well possible, that some kind of "feeding frenzy" is taking place that could catapult the price near 80$ shortly before any meaninful correction will set in.

On 12/24/2025 at 6:46 PM, swissie said:

Puzzeling indeed. I can only conclude that the physical demand of Silver must be great. = I want my Silver today and not next March. (Some magical vacuum cleaner sucking up physical Silver??????) The re-incarnation of the Hunt brothers?

 

I am meeting people that never talked about Silver before. Now they do. That worries me. For over a month, there was no meaningful technical "correction" of Siver, the slightest "dip" causes immidiate buying interest. 

 

Very well possible, that some kind of "feeding frenzy" is taking place that could catapult the price near 80$ shortly before any meaninful correction will set in.

The "feeding frenzy" is in full swing. Today alone, Silver is up over 9%.

  • Author

I have been reading several analyses on what is going on right now. I think most recognize a lot of the upward price pressure is coming from speculators who have recognized this as the latest craze. But behind that, there appears to be an actual crisis.  Based on publicly available numbers, certain banks like JP Morgan have about 30% of the open interest in silver shorts. This is where the talking heads start muddying the waters. They will say that JP Morgan doesn't naked short...that these positions are all offset by long positions. And that might even be true. But here's the rub. That might have worked in the past when everyone was just treating the silver market like a casino and settling for cash.  You could simply offset a long against a short and pocket the difference. That isn't happening now, though. Fully 10% of contracts are now standing for physical settlement, and that percentage is increasing. If JP Morgan can't find physical metal to satisfy their shorts standing for actual delivery, the COMEX will have to send a notice of default and the financial world comes tumbling down.

 

So people are betting that the price will rise to obscene levels to allow the banks to incentivize anyone and everyone to sell their metal to them right now. Of course, with the refineries running flat out, that means taking it from industry who really needs it immediately. And that means a bidding war and a positive feedback loop. Forget parabolic. It's going to go exponential. This is an existential threat for the large investment banks.  This isn't the Hunt Brothers hoarding where you can just change the rules. The banks themselves are in the crosshairs this time. JP Morgan is one of the largest shareholders of CME Group who owns the COMEX.  And while they can deal with a few tens of billions to cover any cash losses, they can't afford to allow the COMEX to default. That ends the game permanently.

 

Yes, it was their own greed and short shortsightedness that put them in this position. They allowed too much leverage to build on top of too little physical supply. It has always been fine up until now, but suddenly large players are exploiting that. So the argument of is it naked shorts, or is it hedging is completely irrelevant. There isn't enough physical silver to meet demand. And those who have shorts of any kind are on the hook to deliver it. It doesn't matter that it may be hedged. This is why China saying we're not going to allow exporting after Jan. 1 is so relevant. It also explains the backwardation in the market. People are actually betting the COMEX won't survive much longer. What happens to the financial markets when it collapses is anyone's guess. There are those who claim it will be contained, and there are others who claim it will launch a derivatives tsunami that will destroy the Western financial system.

 

For me, I'm just hoping the silver casino stays open and accessible long enough for me to pay off my mortgage. Because I think silver is headed to the stratosphere right now, and with the volatility we're about to see I think they're going to raise margin requirements to the stratosphere right along with it. So yeah, I guess I'm one of those speculators I mentioned at the start exacerbating the upward pressure. I'll either be right or I won't.

 

On 12/24/2025 at 3:35 AM, uncletiger said:

So we all watched a month ago as the LBMA ran short on silver. Some pundits called it backwardation. Others said that LBMA and COMEX were fundamentally different products and therefore it wasn't. Well, the past 3 days have quashed any doubt. December delivery on the COMEX is well above delivery in 2026. Nobody can deny the silver market is in backwardation now.

 

On the TFEX, we see December 2025 silver (SVFZ25) consistently above March 2026 silver (SVFH26) by about 0.25% - 0.5%. It's been this way for several days. My question to the experts is "why?"

 

I know the canned responses. There is a scarcity in immediate supply, possibility of a short squeeze, etc. Honestly I don't see an actual scarcity in the real world. Delays on purchasing silver from Bowin are actually shorter now than in weeks past. But my confusion is why do people think that if there is a shortage now, why is going to ease? Refineries are running flat out. You can't spin up any kind of new supply by March.

 

And as for the future, China is going to stop all exports of silver on Jan. 1, putting even further pressure on supply. The appetite for silver by industry and governments appears insatiable. Even the US added it as a critical mineral, allowing agencies to stockpile. So why should March delivery be any less? A rudimentary analysis implies the price should be higher in March, due to ever increasing demand and continually shrinking supply. So why backwardation?

 

It just seems counterintuitive. Nothing is going to fix silver in the short term (< 12 months). Unless there is some mechanism I'm not considering that is going to force prices down. I know the large banks keep trying to suppress the price, but the movements over the last 3 months show that simply isn't working anymore.

 

Anyone have any thoughts on why we're not seeing contango right now?

Wait for a failure to deliver on contracts then watch the fireworks in virtually all commodity markets.  BOOM  Derivative markets implode.

 

In the meanwhile...

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  • Author

An interesting alternative take on what's really going on. JP Morgan is actually the architect of this whole thing. Not the victim. They're crashing the system intentionally to leave all the other banks holding the bag. If true, it means they have a price target in mind where the runup in price is going to stop.

 

 

There seems to be a shortage of physical Silver. OK.

 

Nevertheless the COMEX and the LME are the arena that "make the price". Those 2 markets have become the Silver casino of the world.

 

I would not be surprised, if those markets will be raising margin requirements to 100% soon. At least the purely speculative element of the market would be "stifled", forcing a lot of long positions to be reduced or even liquidated.

 

There are 2 elements that drive the Silver market: Physical demand and purely speculative demand. By stifling the demand on COMEX & LME a good part of the price "upward pressure" will be greatly reduced.

 

To be sure, neighter the COMEX nor the LME will patiently await the meltdown of their markets without implementing prior strong "countermeasures". 

On 12/27/2025 at 11:28 AM, uncletiger said:

An interesting alternative take on what's really going on. JP Morgan is actually the architect of this whole thing. Not the victim. They're crashing the system intentionally to leave all the other banks holding the bag. If true, it means they have a price target in mind where the runup in price is going to stop.

 

 

They are creating "the bubble" themselves, and will dump when the time's right for them, sending the price of silver off a cliff, just after they have cashed out. . 

  • Author

My silver musings for the new year:

All modern electronics requires solder paste. In decades past, lead based solder was common. In this configuration, silver was actually not that important. However, since the EU passed legislation mandating lead free soldering, silver is essentially indispensable. While it is possible to engineer a solder paste without silver or lead, it necessarily becomes brittle. It can work at coarse scales, but at very fine pitch BGA's, it will crack due to thermal expansion and contraction over time. Even a small 3% amount of silver can ameliorate these problems. But without the ability to use lead, silver is the only practical choice. And since so much of modern technology relies on precision electronics, there simply isn't any available alternative.

Industrial use of silver today represents more than 80% of all silver mined annually. And silver, at the current price, can't be economically produced as a resource by itself. It is a byproduct of mining for other base metals. This means supply is necessarily limited and won't be expanding. There isn't a clearly established economic price at which it is practical to increase mining solely because of a silver shortage. It's never been an issue, so nobody really has a good model.

When industrial demand is combined with hoarding, silver has been in a technical shortfall for several years, draining stocks on all major exchanges. There is no foreseeable change short of extreme price changes which will lead to new supply coming online, and that might take 5 or more years.

Refineries are running at 100% output. They have warehouses full of dore already and simply can't accept more scrap silver from coinshops and pawnshops. Spinning up a new refinery is a huge investment which is only now starting to be considered, and those are at least a year away.

Recycling from electronics isn't practical at the current cost basis. The amount of silver used in any single product is microscopic. It will require a minimum 10x increase in cost to justify recovery. Even gold, at 50x the silver price, is just barely worth the effort to recycle. And as the price increases, the amount of inelastic silver used per product will decrease.

The result:

Silver is changing from an internationally traded base metal, to a critical component of national security. If you don't have access to it, you can't have a modern, industrial society, and there isn't enough to go around. As tariffs and export controls are added, the COMEX futures market is being turned into an anachronism. It simply won't exist much longer in its current form.

The primary question becomes: will CME Group just abandon the silver market entirely, or will they struggle to remain relevant in 2026 by allowing the price to rise to try and encourage industry to continue trusting the exchange? This is a hugely political question. I think it's no accident that Melania Trump wore a silver dress to the New Year's Eve party at Mar a Lago and entered to the tune of the Lone Ranger theme song "Hi Ho Silver." Silver is playing an important role in the financial shenanigans that are reshaping contemporary geopolitics.

You and I are left to guess at what is really going to happen. Will the COMEX (and associated products on the TFEX) even exist in 12 months? I wish I knew the answer...

Is there really a silver shortage ?

Stackers and investers in silver are just waiting for the right price.

I can't wait for the criminals from the comex , JPM and others take heavy losses.

12 hours ago, uncletiger said:

Industrial use of silver today represents more than 80% of all silver mined annually

Depends on who you believe.

I've seen lower numbers.

More around 65 %.

  • Author
20 hours ago, FlorC said:

Is there really a silver shortage ?

Stackers and investers in silver are just waiting for the right price.

I can't wait for the criminals from the comex , JPM and others take heavy losses.

We know there absolutely are thousands of tons that have been hoarded. That is undeniable. JP Morgan alone reports 134 million ounces in its vaults.

But in this scenario, the important question becomes what is the "right price"? 2 years ago, that price was openly talked about as $100 - $200. Look on the internet right now though, and that price is in the 4 digits. As the price goes up, so does the "right price". Honestly, what would cause someone to let go of a metal which is viewed as irreplaceable?

There are only a few institutions (such as JPM above) that actually have the ability to set the physical market price. My experience has been most retail silver stackers aren't the kind of people who trade wealth for trinkets. They think it is generational wealth. It's going to take massive new mining sites coming online to free up those sources. And that for sure isn't happening this decade.

So it seems whatever happens, we're at the mercy of the large players for now. I don't think JPM is in any danger of taking heavy losses. I think they're steering this ship. What price do you think serves them? Or the Chinese?

3 hours ago, uncletiger said:

steering this ship

Demand is steering the ship.

3 hours ago, uncletiger said:

we're at the mercy of the large players

A bit dramatic , no ?

If big companies like Tesla, BYD , Samsung really need the silver they will pay whatever is asked.

Musk can buy some silver from me at 20:1 in gold .😉😁

I don't want paper or digital junk "money".

The price action of Silver tells the story. On Dec 29 a big downward move took place. Some feared that this would be the start of a big "wash-out". More likely, just some year end profit taking took place. (looks good on the books).

Currently a technical "flag" is forming. A positive constellation within a bull market.

And the moral of the story: Not fundamentals nor technicals speak against Silver. Next target: 100$.

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