In December's precious metals market, the protagonist wasn't gold; silver was the most dazzling light.
From $40, it leaped to $50, $55, $60, piercing through one historical price point after another at an almost uncontrollable pace, giving the market little time to catch its breath.
On December 12th, spot silver once touched a historic high of $64.28 per ounce before sharply reversing and falling. Year-to-date, silver has surged nearly 110%, far exceeding gold's 60% gain.
This appears to be an "extremely rational" rally, which is precisely why it seems particularly dangerous.
The Crisis Behind the Rise
Why is silver rising?
Because it seems worthy of a rise.
From the explanations of mainstream institutions, it all seems rational.
The Fed's interest rate cut expectations reignited the precious metals rally; recent weak employment and inflation data have led markets to bet on further cuts by early 2026. Silver, as a high-beta asset, is reacting more violently than gold.
Industrial demand is also adding fuel to the fire. The explosive growth in solar energy, electric vehicles, data centers, and AI infrastructure has fully manifested silver's dual attributes (precious metal + industrial metal).
Persistently declining global inventories are the final straw. Mexican and Peruvian mine output fell short of expectations in Q4, and the amount of silver bullion in major exchange warehouses is decreasing year after year.
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If you only look at these reasons, the rise in price is a "consensus," even a belated revaluation.
But the danger of the story lies in this:
Silver's rise seems rational, but it's not solid.
The reason is simple: Silver is not gold. It lacks the consensus gold has and is missing the "national team" support.
Gold is robust because central banks worldwide are buying. Over the past three years, global central banks have purchased over 2,300 tons of gold, which sits on national balance sheets as an extension of sovereign credit.
Silver is different. Global central bank gold reserves exceed 36,000 tons, while official silver reserves are almost zero. Without central bank backing, silver lacks any systemic stabilizer during extreme market volatility, making it a typical "island asset."
The difference in market depth is even more stark. Daily gold trading volume is about $150 billion, while silver is only $5 billion. If gold is the Pacific Ocean, silver is, at best, Poyang Lake.
It has a small market cap, fewer market makers, insufficient liquidity, and limited physical reserves. Most critically, the primary form of silver trading is not physical but "paper silver"—futures, derivatives, and ETFs dominate the market.
This is a dangerous structure.
Shallow waters capsize easily; large fund inflows can instantly roil the entire surface.
And this is precisely what happened this year: a surge of capital rushed in, rapidly pushing up a market that wasn't deep to begin with, lifting prices off the ground.
Futures Squeeze
What derailed silver prices wasn't the seemingly rational fundamental reasons mentioned above; the real price war is in the futures market.
Normally, the spot price of silver should be slightly higher than the futures price. This makes sense—holding physical silver incurs storage and insurance costs, while a futures contract is just a piece of paper and is naturally cheaper. This price spread is generally called "backwardation" or "spot premium."
But starting in the third quarter of this year, this logic inverted.
Futures prices began systematically exceeding spot prices, and the spread grew larger. What does this mean?
Someone is frantically pushing up prices in the futures market. This "contango" (futures premium) phenomenon typically only appears in two situations: either the market is extremely bullish on the future, or someone is engineering a short squeeze.
Considering the gradual improvement in silver's fundamentals—solar and new energy demand doesn't exponentially explode in a few months, and mine output doesn't suddenly dry up—the aggressive performance in the futures market more closely resembles the latter: funds are pushing up futures prices.
A more dangerous signal comes from anomalies in the physical delivery market.
Historical operational data from the COMEX (Commodity Exchange Inc.), the world's largest precious metals trading market, shows that physical delivery of precious metal futures contracts is less than 2%, with the remaining 98% settled in US dollars cash or through contract rollovers.
However, over the past few months, physical silver deliveries on COMEX have surged, far exceeding historical averages. More and more investors are losing trust in "paper silver" and are demanding delivery of actual silver bullion.
A similar phenomenon has occurred with silver ETFs. While large amounts of capital flowed in, some investors began redeeming, demanding physical silver instead of fund shares. This "run-like" redemption is putting pressure on the ETFs' bullion reserves.
This year, squeeze frenzies have occurred successively in the three major silver markets: COMEX in New York, LBMA in London, and the Shanghai Metal Exchange.
Wind data shows that in the week of November 24th, silver inventories on the Shanghai Gold Exchange fell by 58.83 tons to 715.875 tons, hitting a new low since July 3, 2016. CME COMEX silver inventories plummeted from 16,500 tons in early October to 14,100 tons, a drop of 14%.
The reason isn't hard to understand: amid the US dollar rate cut cycle, participants are reluctant to settle in dollars. Another implicit worry is that exchanges might not have enough silver available for delivery.
The modern precious metals market is a highly financialized system. Most "silver" is just numbers on a ledger; actual silver bullion is repeatedly pledged, leased, and衍生品ed globally. One ounce of physical silver might correspond to a dozen different entitlement certificates.
Veteran trader Andy Schectman uses London as an example: the LBMA has only 140 million ounces of floating supply, but daily trading volume reaches 600 million ounces. On top of this 140 million ounces, there exist paper claims exceeding 2 billion ounces.
This "fractional reserve system" works well under normal conditions, but once everyone wants physical metal, the entire system faces a liquidity crisis.
When the shadow of a crisis looms, a strange phenomenon often seems to appear in financial markets, colloquially known as "pulling the plug."
On November 28th, the CME was down for nearly 11 hours due to "data center cooling issues," a record-long outage, preventing COMEX gold and silver futures from updating normally.
Notably, the outage occurred at a critical moment as silver was breaking through historical highs. Spot silver breached $56 that day, and silver futures broke through $57.
Market rumors speculated that the outage was to protect commodity market makers exposed to extreme risk and potentially facing large losses.
Later, data center operator CyrusOne stated that this major interruption stemmed from human operational mistakes, further fueling various "conspiracy theories."
In short, this futures squeeze-driven rally注定 (dooms) the silver market to extreme volatility. Silver has effectively transformed from a traditional safe-haven asset into a high-risk instrument.
Who is the Market Maker?
In this short squeeze drama, one name cannot be avoided: JPMorgan Chase.
The reason is simple: it is internationally recognized as the silver market maker.
For at least eight years, from 2008 to 2016, JPMorgan manipulated gold and silver market prices through its traders.
The method was simple and crude: place large buy or sell orders for silver contracts on the futures market to create a false impression of supply and demand, induce other traders to follow the trend, and then cancel the orders at the last second, profiting from the price fluctuations.
This practice, known as spoofing, ultimately cost JPMorgan a $920 million fine in 2020, once setting a record for a single CFTC fine.
But true textbook market manipulation goes beyond this.
On one hand, JPMorgan used massive short selling and spoofing in the futures market to depress silver price. On the other hand, it amassed physical metal at the low prices it helped create.
Starting from the 2011 silver price high near $50, JPMorgan began hoarding silver in its COMEX warehouses. While other large institutions were reducing silver exposure, it kept adding, at one point accounting for 50% of total COMEX silver inventory.
This strategy exploited the structural缺陷 (flaws) of the silver market: paper silver prices dictate physical silver prices, and JPMorgan could influence paper prices while being one of the largest physical holders.
So what role does JPMorgan play in this round of silver squeeze?
On the surface, JPMorgan seems to have "turned over a new leaf." Following the 2020 settlement, it undertook systematic compliance reforms, including hiring hundreds of new compliance officers.
There is currently no evidence that JPMorgan participated in the short squeeze. But in the silver market, JPMorgan still wields significant influence.
According to the latest CME data from December 11th, JPMorgan holds approximately 196 million ounces of silver within the COMEX system (proprietary + brokerage), accounting for nearly 43% of the exchange's total inventory.
Furthermore, JPMorgan has a special身份 (identity) as the custodian for the silver ETF (SLV), holding 517 million ounces of silver valued at $32.1 billion as of November 2025.
More crucially, JPMorgan controls over half of the Eligible silver (silver that meets delivery standards but hasn't been registered for delivery).
In any round of silver squeeze, the market is essentially博弈 (gaming) two points: first, who can produce the physical silver; second, whether, and when, this silver is allowed into the delivery pool.
Unlike its former role as a major silver short, JPMorgan now sits at the "silver gate."
Currently, Registered (deliverable) silver accounts for only about 30% of total inventory. When the majority of Eligible silver is highly concentrated in a few institutions, the stability of the silver futures market effectively depends on the behavioral choices of a very few key players.
The Gradual Failure of the Paper System
If one had to describe the current silver market in one sentence, it would be:
The rally continues, but the rules have changed.
The market has undergone an irreversible shift; trust in silver's "paper system" is crumbling.
Silver is not an isolated case; the same change is happening in the gold market.
Gold inventories in New York futures exchanges continue to decline, Registered gold repeatedly touches lows, and exchanges have had to transfer bars from originally non-deliverable "Eligible" gold to complete matches.
Globally, capital is quietly undergoing a migration.
Over the past decade-plus, the direction of mainstream asset allocation has been highly financialized—ETFs, derivatives, structured products, leverage tools. Everything could be "securitized."
Now, more and more capital is withdrawing from financial assets,转而 (turning to) seek physical assets that don't rely on financial intermediaries or credit backing,典型的 (typically) gold and silver.
Central banks are continuously and massively increasing gold holdings, almost unanimously choosing physical form. Russia has banned gold exports, and even Western countries like Germany and the Netherlands have demanded the repatriation of gold reserves stored overseas.
Liquidity is giving way to certainty.
When gold supply cannot meet the huge physical demand, capital begins searching for substitutes, and silver naturally becomes the first choice.
The essence of this physicalization movement is the re-contention of monetary pricing power against the backdrop of a weak US dollar and deglobalization.
According to a Bloomberg report in October, global gold is moving from West to East.
Data from the US CME and the London Bullion Market Association (LBMA) show that since late April, over 527 tons of gold have flowed out of the vaults of New York and London, the two largest Western markets. Meanwhile, gold imports have increased in major Asian consumer countries like China. China's gold imports in August hit a four-year high.
In response to market changes, in late November 2025, JPMorgan moved its precious metals trading team from the US to Singapore.
Behind the surge in gold and silver lies the return of the concept of a "gold standard." It might not be realistic short-term, but one thing is certain: whoever holds more physical metal holds greater pricing power.
When the music stops, only those holding real gold and silver will have a chair to sit in.
