Silver just had the kind of day that makes investors check their screens twice. The grey metal blasted through previous records on Friday, surging over 5% to $56 per ounce in its strongest single-day performance in more than a year. Investors are scrambling to secure physical metal as supplies tighten and concerns about a global shortage intensify.
The iShares Silver Trust (SLV) has now climbed 95% year to date, putting 2025 on track to be silver's best year since 1979. That's the year the Hunt brothers tried their infamous scheme to corner the silver market, and yes, it's wild that we're comparing this year to that one.
The China Squeeze
The real story here is what's happening in China's physical silver market, and it's not pretty if you're trying to buy the stuff. According to official data, silver on-warrant inventories at the Shanghai Futures Exchange dropped by 9,361 kilograms this week to just 531,211 kilograms. That's the lowest level since 2015, and when you're talking about a commodity market, inventory levels like that get people nervous fast.
ING commodity analysts Warren Patterson and Ewa Manthey pointed out that the sharp stockpile decline reflects massive shipments of Chinese silver heading to London. Chinese producers are trying to ease a price squeeze that recently pushed global prices to record levels. Here's the kicker: China's silver exports in October exploded to over 660 tonnes, an all-time high. When you see export numbers like that, you know the market has gotten seriously tight.
Making matters more interesting, Shanghai's silver market has flipped into backwardation. That's market-speak for a situation where near-term futures contracts trade at higher prices than longer-dated ones. It's essentially the market screaming that people need silver right now, not later. It signals immediate physical scarcity, and it's the kind of condition that can drive prices higher in a hurry.
The Fed Factor
Beyond the supply crunch, silver got an extra boost this week from growing expectations that the Federal Reserve will ease monetary policy. The probability of a 25 basis-point rate cut at the Fed's December 10 meeting jumped to nearly 90%, up sharply from around 50% just a week earlier. Lower interest rates tend to be good for precious metals since they reduce the opportunity cost of holding non-yielding assets like silver.
Can December Keep This Going?
With prices already up over 90% this year, the obvious question is whether December can add more fuel to this rally. Seasonal trends suggest it's possible, maybe even likely.
Over the last 30 years, silver has averaged a 2.12% gain in December, making it the third-strongest month of the year. Only July's 3.2% average and January's 2.7% average returns are higher. Historically, silver closes December in positive territory 60% of the time, which isn't bad odds if you're already holding the metal.
The best December returns for silver occurred in 1997 and 2020, with gains of about 17% in each of those months. If tight supply conditions persist and that Fed rate cut materializes, this seasonal tailwind could amplify the current price momentum even further.
Mining Stocks Wake Up
After weeks of subdued performance, silver mining equities are finally catching fire. The Global X Silver Miners ETF (SIL) rose for a fifth straight session on Friday, jumping over 12% in just two days. Several silver-focused miners registered double-digit percentage gains as traders piled into the sector.
Leading Friday's gains was Aya Gold & Silver Inc. (AYASF), up 14.18%, followed by Andean Precious Metals Corp. (ANPMF) and Discovery Silver Corp. (OTCPK: DSVSF), which rose 12.66% and 12.39%, respectively.
Other notable movers included Gold Resource Corporation (GORO), up 11.14%, Silver Mines Limited (SLVMF), up 11.11%, and Hycroft Mining Holding Corporation (HYMC), which gained 11.04%.
The mining stock rally makes sense when you think about it. These companies are essentially leveraged plays on silver prices. When the underlying commodity surges 5% in a single day, mining equities tend to move even more dramatically as investors price in higher profit margins. The question now is whether this momentum can sustain itself or if we're due for a breather after such an explosive move.