Author: Xiaobing | Deep Tide TechFlow
In December's precious metals market, the protagonist wasn't gold; silver was the most dazzling light.
From $40, it surged to $50, $55, $60, piercing through one historical price point after another at an almost uncontrollable pace, leaving the market little room to breathe.
On December 12th, spot silver once hit a historical high of $64.28 per ounce before sharply reversing and falling. Year-to-date, silver has accumulated a gain of nearly 110%, far exceeding gold's 60% increase.
This appears to be an "extremely rational" rise, which also makes it seem particularly dangerous.
The Crisis Behind the Rise
Why is silver rising?
Because it seems worthy of rising.
From the explanations of mainstream institutions, it all seems rational sense.
The Fed's interest rate cut expectations reignited the precious metals rally; recent weak employment and inflation data led the market to bet on further rate cuts by early 2026. Silver, as a high-beta asset, reacted 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 adding insult to injury. Mexican and Peruvian mine production fell short of expectations in Q4, and silver ingot stocks in major exchange warehouses are lower year after year.
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If one only looks at these reasons, the rise in silver prices is a "consensus," even a belated value re-rating.
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; it is missing "national team" support.
Gold remains 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 backstop, silver lacks any systemic stabilizer during extreme market volatility, making it a typical "island asset."
The difference in market depth is even more stark. Gold's daily trading volume is about $150 billion; silver's 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 crucially, the primary form of silver trading is not physical metal but "paper silver"—futures, derivatives, and ETFs dominate the market.
This is a dangerous structure.
Shallow water capsizes easily; large funds entering can churn the entire surface.
And this is precisely what happened this year: A wave of funds suddenly 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 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 paper, naturally cheaper. This price difference is generally called "backwardation" (现货升水).
But starting in the third quarter of this year, this logic reversed.
Futures prices began systematically exceeding spot prices, and the gap kept widening. What does this mean?
Someone is frantically pushing up prices in the futures market. This "contango" (期货升水) phenomenon usually only appears in two situations: either the market is extremely bullish on the future, or someone is forcing a squeeze (逼仓).
Considering that the improvement in silver fundamentals is gradual—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更像 the latter: Funds are pushing up futures prices.
A more dangerous signal comes from anomalies in the physical delivery market.
Operational history data from the world's largest precious metals trading market, COMEX (Commodity Exchange Inc.), shows that physical delivery of precious metals 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"; they are demanding actual silver bars.
Silver ETFs have seen a similar phenomenon. While large amounts of funds flowed in, some investors began redeeming, demanding physical silver instead of fund shares. This "run-like" redemption is putting pressure on the ETFs' silver bar reserves.
This year, runs have occurred in succession in the three major silver markets: New York COMEX, London LBMA, 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: under the US interest rate cut cycle, people are unwilling to settle in dollars. Another hidden 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 book entries, with real silver bars being repeatedly pledged, leased, and derived globally. One ounce of physical silver might correspond to a dozen different entitlement certificates simultaneously.
Veteran trader Andy Schectman cited London as an example: 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 in normal times, but once everyone wants physical metal, the entire system faces a liquidity crisis.
When the shadow of a crisis looms, a strange phenomenon似乎总是出现在金融市场, commonly called "pulling the plug."
On November 28th, 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 broke 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 error, further fueling various "conspiracy theories."
In short, this futures squeeze-dominated market注定 results in剧烈 volatility in the silver market. Silver has essentially transformed from a traditional safe-haven asset into a high-risk speculative target.
Who is the Market Maker?
In this squeeze drama, one name cannot be bypassed: 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: placing large orders to buy or sell silver contracts on the futures market to create false supply and demand impressions, inducing other traders to follow the momentum, and then canceling the orders at the last second, profiting from the price fluctuations.
This practice, known as spoofing,最终 led to JPMorgan receiving a $920 million fine in 2020, once setting a record for a single CFTC fine.
But the real textbook-level market manipulation goes beyond that.
On one hand, JPMorgan depressed silver prices through massive short selling and spoofing in the futures market. On the other hand, it massively acquired physical metal at the low prices it itself created.
Starting around the 2011 silver price high near $50, JPMorgan began hoarding silver in its COMEX warehouses, consistently adding positions while other large institutions reduced theirs, at one point accounting for 50% of total COMEX silver inventory.
This strategy exploited the structural缺陷 of the silver market: Paper silver prices dictate physical silver prices, and JPMorgan could influence paper prices while being one of the largest physical silver 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 underwent systematic compliance reforms, including hiring hundreds of new compliance officers.
There is currently no evidence表明 JPMorgan participated in the short squeeze行情. But in the silver market, JPMorgan still holds 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: the custodian for the silver ETF (SLV). As of November 2025, it custodies 517 million ounces of silver, worth $32.1 billion.
More crucially, in the Eligible silver category (silver that qualifies for delivery but hasn't been registered as deliverable), JPMorgan controls over half the volume.
In any round of silver squeeze行情, the market truly博弈 over two points: First, who can produce physical silver; Second, whether, and when, this silver is allowed into the delivery pool.
Unlike its past 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 very few key players.
The Paper System Gradually Failing
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 the silver "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, forcing exchanges 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 was highly financialized—ETFs, derivatives, structured products, leverage tools. Everything could be "securitized."
Now, more and more capital is withdrawing from financial assets,转而 seeking physical assets that don't rely on financial intermediaries or credit背书,典型的 being gold and silver.
Central banks are continuously and massively increasing gold holdings, almost无一例外 opting for physical form. Russia has banned gold exports; 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 to look for substitutes, and silver naturally becomes the first choice.
The essence of this physicalization movement is the re-contesting 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 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 gold-consuming 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 desk from the US to Singapore.
Behind the surge in gold and silver lies the return of the concept of the "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 can sit down safely.
