Silver’s Physical Squeeze Intensifies While Paper Market Stalls

Silver at $75.83 is 35% below its record, yet Chinese premiums and COMEX deliveries signal acute physical tightness, while a strong dollar and hawkish Fed cap the upside.

Silver’s spot price of $75.83 an ounce masks a growing schism between booming physical demand and the constrained macro backdrop. The metal trades just below its 50-day moving average and remains roughly 35 percent below the January record high of $116.89, even as buyers in Shanghai pay premiums of 12 to 13 percent over the western spot market — a level previously capped at $22 per ounce. The picture is one of acute tightness colliding with cautious paper trading.

Behind that premium lies China’s insatiable appetite for the industrial metal. The country is the world’s largest silver consumer, with solar panel production and advanced manufacturing consuming ever larger volumes. Beijing has further tightened the screw by restricting silver exports, effectively blocking the arbitrage that would normally close the gap between Asian spot prices and COMEX futures. The result is a persistent divergence that keeps the Asian market at a structural premium, regardless of what happens in New York.

Meanwhile, the physical delivery pipeline is showing similar strain. At the COMEX, over 22 million ounces of silver have been called for delivery — a sign that market participants are demanding the real metal rather than settling in cash. Registered inventories remain historically low, reinforcing the supply narrative even as the paper price drifts sideways. This duality has kept the metal’s 30-day volatility elevated at 55.5 percent and the relative strength index at a neutral 58.9, suggesting no clear directional bias.

Macro factors have been the primary drag. The prospect of a diplomatic thaw between the US and Iran — with a possible 60-day extension of the current ceasefire — has eroded part of the geopolitical risk premium that had supported precious metals. A stronger dollar, buoyed by resilient US economic data, has added pressure on an asset that offers no yield. Friday’s close marked a 0.5 percent decline on the day and a 0.49 percent loss for the week, though the monthly comparison remains positive at 5.95 percent.

Monetary policy expectations complicate the outlook further. The PCE price index rose to 3.8 percent, narrowing the room for rapid rate cuts ahead of the Federal Reserve’s June 16 meeting. The upcoming US jobs report on June 5 will provide the next key data point. A strong reading could reinforce dollar strength and push silver lower, while a weak print might revive bets on easier policy. On the downside, the $70–$72 zone has served as reliable support in recent months; a break below that would mark a significant technical deterioration.

In the longer view, the supply deficit narrative remains intact. China’s structural import demand, export restrictions, and the industrial shift toward solar and electronics all point to sustained physical tightness. But for now, the paper market is caught between those forces and the hawkish signals from the central bank. Until the macro headwinds ease — or a clear catalyst emerges from the data — silver is likely to remain stuck in a volatile sideways grind, with all the tension that implies.