The Great Silver Short Squeeze Drama in 2025: Indian Influencers, Chinese Holidays, and London Bank Runs.

A perfect storm is sweeping through the global silver market. The frenzy of retail investors sparked by Indian social media influencers, supply disruptions caused by Chinese holidays, and the depletion of silver stocks in London have collectively triggered the most serious silver market crisis since the Hunt brothers' manipulation incident in 1980. Last Friday, after reaching a historical high of $54 per ounce, the price of silver plummeted by 6.7%, highlighting extreme pressure in the market. India's largest precious metal refinery ran out of inventory for the first time in history, with its trading director Vipin Raina stating that he had not seen such a crazy market in 27 years. Major banks like JPMorgan temporarily stopped supplying silver to India, with deliveries not expected until November at the earliest. The root cause of this crisis may be a long-standing structural imbalance in the silver market, potentially instigated by the recent events. Indian retail FOMO frenzy Before this year's Indian Diwali festival, investment banker and Indian social media influencer Sarthak Ahuja posted on social platforms that silver was relatively cheap compared to gold and encouraged people to buy, igniting a frenzy online. Traditionally, Indians buy gold during Diwali, but this year, demand for silver surged to unprecedented levels. As a result, the premium on silver soared to over $5 per ounce, far exceeding the normal few cents difference. A bidding war erupted in the Mumbai gold market, with major buyers more concerned about supply than price. Fund companies were forced to temporarily suspend new purchases of silver funds, and funds operated by Kotak, UTI, and national banks followed suit. Analysts pointed out that the FOMO effect had an unprecedented impact on the Indian market. Liquidity crisis in the London market, emergency mobilization of New York inventory While demand surged in India, Chinese factories closed for the holidays, leading to a concentration of global supply in London. However, the freely available stock in the London market has dropped to less than 150 million ounces, while the daily trading volume is around 250 million ounces. Overnight lending rates surged to an annualized 200%, causing major banks to withdraw their quotes, widening the bid-ask spread to a level where trading became almost impossible. Traders described clients who borrowed silver repeatedly inquiring about lending costs, and when banks could not extend their loans, clients even yelled over the phone. Swiss precious metals refinery Argor-Heraeus stated that there was almost no liquidity in the London market, and they had essentially halted all acquisitions not covered by contracts. Facing a supply crisis in London, traders turned to the Comex inventory in New York. Over the past two weeks, Comex inventories have decreased by over 20 million ounces, the largest drop in 25 years. Traders sought to move silver to London to relieve the strain, but logistics were complex, and customs delays could lead to a significant increase in rollover costs. The potential mineral tariffs that Trump may introduce also increased arbitrage risks. Outbreak of a long-standing structural imbalance in the silver market This crisis is not a sudden event but a concentrated outbreak of long-standing structural imbalances over the years. According to data from the Silver Institute, silver demand has exceeded mineral and recycled supply for the past five years, with a total shortfall of 678 million ounces largely attributable to the prosperity of the solar industry. Solar demand more than doubled during this period, while London's total inventory in early 2021 was around 1.1 billion ounces. Market pressures have been accumulating since the beginning of this year. Concerns about silver being affected by reciprocal tariffs from Trump prompted traders to move over 200 million ounces of metal into New York warehouses ahead of time, attempting to avoid potential tariffs. In addition to the tariff-driven inventory transfers, global ETFs absorbed over 100 million ounces of silver in the first nine months of this year, fueling a wave of precious metal investment demand that also propelled gold to surpass $4,000 per ounce for the first time. These two major trends have exhausted London's reserves, reducing the available metal that supports the daily trading volume of around 250 million ounces to dangerously low levels. TD Securities analyst Daniel Ghali has been warning for over a year that the London market is laying the groundwork for a run. A few days before the peak of the run, he had released a report stating that the end was near and advised clients to short. He prematurely judged the peak as prices continued to soar. However, by last Friday, the market once again moved in the direction he had predicted, with silver prices plummeting by over 5% at the close. Ghali stated that with a large amount of silver entering the market (not only from New York but also from as far as China), further price pressure may occur: logistics are indeed more complex than we originally assumed. We didn't anticipate that, while facing a run in the London market, there would be such a large-scale frenzy of retail buying globally. This article is reprinted from "Wall Street View" by Zhu Xueying; edited by Feng Qiuyi for GMTEight.