A curious case of silver, from Anatoly Veltman

So as Silver trades yet another stratospheric (psychological) target of $77 today, there are a few questions. On commercial side, both Demand and Supply are price-inelastic. Whatever industrial uses are, Silver is hardly substitutable, especially at the time when other metals are just as pricey. And on new Supply side, much Silver gets out of the ground as a by-product from mines not primarily operating as "a Silver mine". So, again, Silver production can't be easily jacked up during Silver's rise.

On non-commercial side, however, it's the opposite. Supply/Demand balance works as it should. $77 (or $100 lol) market would cause Buyers to be abandoning bids; while grandmas might start dusting silverware off and storming pawnshops. Any other considerations?

Peter Penha responds:

Exactly - if you look at the Silver Institute Supply / Demand models it shows we have been in several years of deficits (still in deficit of course this year and next) - Mine supply peaked a decade ago

If you add up all the non industrial uses of silver (Jewelry, Photography+film (Chris Nolan & IMAX), and all silverware) they do not make up the deficit.

So in the Silver Institute model and I am talking 2023 $28 silver price we have some 20% of total ounces that need to be divested every year to maintain supply/demand.

60% of uses are industrial - solar is the future everywhere now….for those missing the US battery trade —> the Biden era tax credits for solar are now Trump credits for solar+batteries & the AI data centers are now going to be Bring Your Own Capacity and storage & connect to the grid

President Trump has declared Silver a strategic metal but I believe our US strategic stockpile is at zero.

LBJ had used 400mm+ oz of the US reserve to try to keep silver coins in circulation - 4 billion coins minted in 1964 and the public took all of it in exchange for paper US dollars - now the rest of the world see where the supply of US dollars are heading with our Trillion $ deficits - every year more than the value of all precious metal production and are doing the same.

Military demand is never discussed or modeled but there never was or is anything but silver to be used in all military equipment - and not replaced by copper at any price - every missile - anything that gets fired of any size with any guidance system.

It is in the Chinese interest to pay the LEAST amount possible for every ounce of gold, silver, copper, platinum, palladium, etc… Physical real price in China of Silver closed at $82.07 an ounce this morning (@oriental_ghost on X is the first thing I check)

It is a 1 billion ounce a year market - $82 billion annualized at today’s Shanghai price and we have $2 trillion of devaluing paper US $100 bills overseas.

Is it 1965 or 1979 ? I am in the 1965 camp because we cannot stop our government deficit cold (7% of GDP) without sending the SPX back below 4000 - and as Luke Gromen has pointed out taxes from capital gains on equities and real estate is a large part in keeping our deficit that “low."

Google "Reserve Bank of India Silver Collateral" - new and starting April 1st 2026 (see the ratio of what can you borrow vs gold and vs silver - I think this incentivizes at the margin Indians to sell gold and buy silver to post as collateral.

On US demand - Silver and Gold Eagle sales are -60% from 2024 (and down much more from prior years) so yes US demand is reacting and disappearing which also means we do not set the price - source is US Mint Bullion Sales by Month.

I cannot confirm the following but:

Story that China has banned Silver exports from Jan 1 2026 - question is if these exports are what has kept the LBMA and Comex liquid - this may be more of the cat + mouse that China plays with the US Administration on chips and rare earths etc

Story that ICICI Prudential Silver ETF is dropping the LBMA as a reference price in order to price off domestic Indian Silver prices.

CME Group COMEX Rulebook Chapter 7 (Failure to Deliver) being tweeted by commodity people is either a sign of a top or the start of a bigger story.

Bud Conrad writes:

All the big precious metals commentators I know of are giving bullish interpretations, indication long term positive opinions: Sprott (a billionaire), Rule (very successful), and a long list of credible long time bulls: Craig Hemke, Tavi Costa, Doug Casey, Robert Keintz, Sean Foo, John Rubino, Mike Malone, Peter Schiff, Michael Oliver, Lynnette Zang, Andy Schectman, Alistair McCloud, David Morgan, Bill Holter, Egon Von Greyerz, Mathew Pipenberg, Lobo Tigre, Jim Rickards, Peter Grandich, … In other words: ALL of them!

There is even an AI-generated analyst that talks clearly through an AI created Asian looking talking head with glasses, that is very current on the latest news and vault storage moves that comes under various names like "Financial Revelations" "The Boring Currency". Except for a few gross errors in pronouncing things, and a few detailed facts that don't line up, the head has a bullish bias like all the rest.

I am on the same side of the boat with all the rest, but there has to be a risk that something major, such as a government seizure or control, could topple this runaway move. For now, the billionaires are getting richer. It feels bigger than Crypto was to me.

Anatoly Veltman adds:

Throughout market history, we learned that any Bull Market will end up further than anyone can measure and foresee. Yet, what you point out about the 100% Bullish Consensus should make one very cautious indeed. In October 2025 at 126,000 Bitcoin, my warnings felt extremely lonely.

Peter Penha writes:

Wow - you mentioned commentators that I have never heard of & I do follow this market.

The ones who make a living commentating e.g. Jim Rickards or Peter Schiff’s who bad mouths BTC the way BTC cultists bad mouth Gold - obviously each group does not own both - I really ignore.

The Sprott’s of the world (and Rick Rule was CEO at Sprott) or Tom Kaplan (strong opinion of Gold/DJIA will converge again like in 1933 and 1980) at least “do” versus preach and built something from nothing #respect.

I agree with you - that at some point this market will freeze because of a force majeur and who knows then about the structured products / financialization. An ETF gives you no claim whatsoever - The reason to follow this move is the geopolitical one & that began with the USD swift payment system weaponization (used like a young boy would use a water gun - S Druckenmiller) - and the idea that all sovereigns need to bow to US Treasury - it forces the hand of rivals or at an extreme enemies of our enemies (e.g. a India / China relationship) to look for an alternative to the US$

If that leads to YCC in the USA (not that anyone “knows” but Gundlach is adamant on the US government has broken the law before in the GFC and will do so again.) Russell Napier who I truly believe is the greatest commentator on markets (in being first to change his views and the logic why) has recently said - diversify into other countries that you will enjoy spending time in because you will have to go there to spend your money when currency controls are imposed.

I am in the Kiril Sokollof camp that Gold is the ultimate leading indicator not coincident in any way & why Gold topped well before inflation did in 1980, or the 10 year Yield (which topped a year later) or equities which bottomed in August 1982. In which case this move in precious metals (for me) is a “by the pricking of my thumbs, something wicked this way comes” in markets.

A breakdown in the world order (are we already in a WW3 or not) will impact our living standards more than any other countries - because we live so high and profit from the exorbitant privilege (supported by a global business and political elite in other countries we keep in power & who keep their wealth offshore in USD)

I mean this in an amoral way but I believe this ends with another 2010 food inflation around the world -> Arab Spring etc….

So I am long Sugar and will buy call options on Sugar & at some point the trade is BRK (real things) over SPX and especially because BRK is cash with all its optionality.

This list has taught me to respect the positive drift & that the judicious use of leverage is the way to wealth.

A quick LLM on strategic metals gets you a lot -

Core WWII legal authority: Trading With the Enemy Act (1917)
Strategic and Critical Materials Stock Piling Act (1939)

War Production Board (WPB) Orders — this is where platinum was nailed down
The War Production Board issued specific orders governing platinum.

Key one:
WPB Limitation Order L-208 (and related orders)
These orders:

Prohibited civilian use of platinum except for licensed purposes

Required government approval for:

Sale

Transfer

Fabrication

Industrial consumption

Forced substitution wherever possible (silver, copper, base metals)

Platinum was considered more strategic than gold during WWII. Jewelry use was effectively banned. Industrial inventories were scrutinized.

Carder Dimitroff writes:

From a market perspective, our FO is expecting one or more black swan events. For us, scope, timing, and probabilities are unclear. But triggers seem clear with the possibility of cascading events. Other FOs share views but with different probabilities. We think the silver market may confirm concerns.

On the speculative side, we believe GOOGL/GOOG is the likely winner for the AI race. Like another list member, we have family biases. Accordingly, our position is both speculative and long-term.

Anatoly Veltman conjectures:

I don't see this hour's $79 silver print predicting some Black Swan. Gold wouldn't have lagged smaller metals. There is serious action required behind the scenes, to save the COMEX. It'll be masterminded by Monday. The exchange shouldn't collapse over the few-trillion Silver market. It would be a $30+ trillion Gold market that could - legitimately - collapse the futures exchange; but they won't let it happen over Silver.

Peter Ringel offers:

I had this thought model all year around: What if equity has to come down for inflation to come down. At least that is how the price action was this year. A counter argument would be: equity like gold simply acts on inflation, not causing it.

William Huggins comments:

broadly speaking, if asset prices crash, there is an impact on future consumption (wealth effect) which could certainly reduce inflationary pressures from the demand side.

Archives

Resources & Links

Search