Silver Craziness, Musk says bluntly: This is not good!

This week, silver approached $80 per ounce for the first time, with a sharp rise far exceeding gold. On the 27th, Musk expressed his concerns, stating that this is "not good for industrial development". Musk made the remarks on the social media platform X. In response to discussions about the explosive growth in silver prices due to "severe global supply shortages," Musk commented: "This is not good. Silver is needed in many industrial processes." Analysis points out that the global silver market has been in a structural deficit for five consecutive years, physical inventories are depleting rapidly, and inventories on major exchanges are declining significantly. The market is facing a real-time supply squeeze driven not just by safe-haven sentiment, but also by rising industrial demand. Silver is not just a precious metal investment, but also a key raw material for CECEP Solar Energy's solar panels, electric vehicles, electronic products, and medical equipment. With industrial demand accounting for 50% to 60% of total demand, supply bottlenecks are forcing prices into a vertical upward trend, increasing anxiety from financial institutions to physical manufacturers. Supply gap widening with production constraints The supply-demand gap in the silver market is widening. Data for 2025 shows global silver demand reaching 1.24 billion ounces, while supply is only 1.01 billion ounces, meaning the market faces a supply gap of 100 million to 250 million ounces. This supply-demand imbalance is described as a "structural deficit" with no signs of quick repair. The core reason for this situation lies in the rigidity of supply at the mine end. Silver mining is mostly a byproduct of copper and zinc mining, with new mines typically taking more than 10 years to develop, and ore quality is declining. At the same time, the incremental increase in recycling is not enough to fill this gap, making the supply side appear weak in the face of surging demand. A more severe signal comes from the sharp drop in inventory data. Since 2020, COMEX's silver inventories have decreased by 70%, and London's gold vault inventories have decreased by 40%. At the current rate of demand, available silver inventories in some regions can only last for 30 to 45 days. Disconnect between paper silver and physical market Market analysis also points to an extreme imbalance between "paper silver" and physical silver. It is estimated that the ratio of paper trading to physical silver is as high as 356:1, meaning that every ounce of physical silver corresponds to hundreds of paper claims. This disconnect increases market fragility. Even if a small fraction of buyers were to request physical delivery, the existing system could face the risk of collapse. Market participants have already recognized this risk, which is a key reason for the recent vertical price increase. Banks and institutions are reacting to supply constraints, physical shortages, and the potential risks of the paper market. Musk's concerns primarily stem from silver's core position in modern industry. Unlike gold, silver is not just a safe-haven asset, but also an industrial metal. Apart from its applications in the electric vehicle industry, silver is irreplaceable in the solar industry, electronic components, and medical equipment. Currently, industrial uses account for half of total silver demand. Due to the lack of effective substitutes in many applications, industrial buyers have a lower sensitivity to prices, but are extremely vulnerable in the face of supply shortages. As Musk stated, the dramatic price fluctuations are indeed a serious challenge for industries that rely on these key raw materials. This article is reproduced from "Wall Street Seeing News", authored by Zhang Yaqi; GMTEight edited by Liu Jiayin.