Silver's Price Disconnect Is Becoming Too Large To Ignore

Silver has closed 2025 as the best-performing asset after a historic 26% surge in December. Yet market participants warn that this rally is not a replay of the Hunt brothers' blow‑off in 1980 or the QE panic in 2011.

Back then, with leverage removed, the price could fall back because the metal was available. Today, silver is in a persistent deficit, experiencing surging industrial demand and a tightening geopolitical grip on physical flows.

Deficits Make It Different 

In 1980, the Hunts used leverage to corner a relatively small futures market. Inventories still existed in size. When COMEX hiked margins and went to "liquidation only," longs were forced out, and the corner collapsed.

In 2011, ETF inflows and investment demand as a hedge against QE propelled the demand. Still, solar and industrial use were smaller, and above‑ground stocks and Western vaults could eventually meet demand once the panic cooled.

Today, these vaults are getting starved for physical metal. For years running, silver demand has outstripped mine supply and recycling, draining inventories. Industrial usage – especially solar, EVs, and electronics – has surged. The changing market dynamics have naturally shifted investment preferences.

As veteran trader Francis Hunt noted in a recent interview for Commodity culture, "people have a loss of trust in the western system and insist on physically holding and controlling the actual metal."

Rapid Margin Hikes 

COMEX's recent margin hikes land in that very different context. Initial margin on the 5,000‑ounce contract has jumped from $20,000 to $25,000 and now $32,500 – about a 62.5% increase.

Hunt points out that this "took some of the sting out of the thin markets," shaking out leveraged speculators and amplifying short‑term volatility. But forcing weak longs to liquidate does not create new ounces. Shorts, too, face a higher margin and growing difficulty sourcing bar‑sized metal anywhere near futures settlement.

Margin policy can thin participation and whipsaw price, but in a structurally tight market, it cannot reverse years of under‑supply and over‑consumption.

China Tightens Its Grip 

Meanwhile, China has not banned silver exports outright, but reclassified the metal as a strategic commodity. Thus, it controls the outflow through 44 licensed companies. Every outbound ton is now a political decision, not just a price response.

As Hunt noted, "Beijing knows every single ounce and who's doing it."

Given China's dominance in refining and its role as a major miner, this licensing wall effectively turns a large share of tradable silver into a tool of policy.

The ongoing market changes are best seen in an escalating disconnect between paper and physical prices. The heaviest‑traded COMEX March 2026 contract closed on Friday at $72.265 per ounce.

Yet in Dubai, a significant bullion hub, the cheapest one‑ounce coin trades at $99.93.

That spread is equivalent to what the entire ounce traded for in the recent past. That is not a normal fabrication premium. It is a sign that the paper and metal have diverged, but only one of those can melt, solder, and power the world's technology.

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