Silver’s Unprecedented Supply Crunch Sparks Record Rally

Silber Preis XC0009653103

The silver market is currently experiencing a historic supply squeeze, propelling the precious metal to record-breaking price levels. A dramatic shortage of physical metal, highlighted by critically low warehouse inventories, has fueled a breathtaking 17% surge in just seven days. With a staggering 96% gain since the start of the year, silver's performance has decisively outpaced even gold. The central question for investors now is whether this momentum is sustainable or if a sharp correction is imminent.

Beyond speculative flows, fundamental demand drivers are adding sustained pressure. Rising industrial consumption, particularly from the artificial intelligence computing sector and the solar energy industry, is meeting a constrained supply pipeline. Mine production in key regions like Central and South America has stagnated, further tightening the physical market.

This fundamental backdrop has been supercharged by monetary policy expectations. Market pricing currently indicates an 88% probability that the U.S. Federal Reserve will cut interest rates by 25 basis points at its upcoming meeting. Lower interest rates typically serve as a catalyst for non-yielding assets like precious metals, reducing the opportunity cost of holding them.

Warehouse Data Reveals Critical Shortage

At the core of the price explosion is a tangible scarcity of metal. Registered inventories at the Shanghai Futures Exchange have plummeted to their lowest level in nearly a decade. This acute shortage in Asia triggered a direct market response: a record volume of silver was transferred to London vaults during November to alleviate the strain.

The massive influx of speculative capital has been another defining feature of this rally. Silver-backed exchange-traded funds (ETFs) alone absorbed inflows equivalent to 95 million ounces in the first half of 2025. Consequently, global identifiable holdings have climbed to a collective 1.13 billion ounces.

Key Market Drivers:
* Shanghai exchange inventories hit a ten-year low.
* Record-breaking physical transfers to London occurred in November.
* An 88% chance of a Fed rate cut is priced into markets.
* Industrial demand is rising from AI data centers and solar panel manufacturing.
* Mine output in Central and South America has stalled.

Price Action Tests Critical Resistance

Following its parabolic ascent, the silver price is now consolidating just below the critical $59 per ounce level. The metal set an all-time high of $58.84 on Monday. From a technical perspective, the price band between $58.90 and $59.00 represents a formidable resistance zone. Initial support is seen at $56.47, with a further floor around $54.97.

Economic data continues to shape the narrative. The U.S. manufacturing sector contracted for a ninth consecutive month in November, increasing pressure on the Fed to adopt a more accommodative monetary policy. Traders are now keenly awaiting the upcoming ADP employment report and other macroeconomic indicators. These releases will provide crucial clues on whether the historic squeeze has more room to run or if the market is due for a breather.

The gold-silver ratio, a closely watched metric, has fallen to approximately 70. This highlights silver's exceptional outperformance; while gold has posted a respectable 62% gain this year, silver's 96% advance has been markedly stronger.