SILVER SHINES

Silver is now trading at 80 dollars an ounce, and seems to be trending up further. This is a parabolic upmove that has caught most investors by surprise. 

Sometime in the letter half of 2025 it became apparent that something fundamental was shifting in the silver market. All the reasons were not apparent, but it was clear that the shift was happening. 

We are in the middle of a complete realignment in the silver market that is happening as we speak. 

Reasons, in short, are: 

1) Silver as a monetary  metal has gained prominence along with gold, with the global monetary system looking increasingly fragile. 

US debt to GDP ratio is unsustainable. Dollar as reserve currency of the world may be reaching its end of life. The BRICS nations and other countries are quietly preparing for alternate settlement mechanisms. 

Silver has been currency for more than 5000 years, along with gold. Any new monetary system that emerges from the debris of another failed fiat currency regime will  need gold and silver as anchors. 

2) Silver as an industrial commodity is gaining further prominence. 

The traditional industries using silver continue to consume it, and new uses have emerged. Considering that traditionally industry already consumes 80 percent of annual mine production, these new use cases will ensure that going forward, the demand for silver is more than the annual production. 

The new uses are in solar PV cells, electric vehicles, missiles, and AI data centers. 

Add to that Samsung's new solid state EV  battery that will hit production in 2027. This battery promises a 1000 km range on a nine minute charge. The only catch? It needs one kilogram of silver per battery! 

Tesla in its new Tesla truck has moved from 12 volt electricals to 48 volts. This introduces certain technical constraints which necessitate the use of more silver. Silver just happens to be the best electrical conductor on the planet. 

3) Most industrial demand for silver is inelastic. Either there are no practical substitutes, or it is of the nature of a Giffen Good where the cost of embedded silver compared to the final product is so low, that price does not matter. 

4) Supply of silver is inelastic too. It is not easily available. Tons of ore are required to produce one gram of silver. 

New supply sources are few. It takes ten years to get a new mine into production. Old mines are declining in capacity rather than increasing. Pure silver mines supply only 25 percent of the actual demand, the other 75 percent comes from mines where silver is a byproduct, like gold, lead and zinc mines. 

It is also a problem that mines exist in very few countries across the world. Once governments recognise its importance, they will put curbs on its production and export. China is doing that with effect from January 1st, 2026. Other countries will follow. 

5) The paper market for silver ( and gold) is an order of magnitude times higher than the actual physical market. Think 100 times or more. 

Like fractional reserve banking, this system works, till it works. Just like a bank cannot sustain a run on its deposits, the paper markets cannot sustain a demand for delivery from more than a tiny fraction of its participants. That process has begun, more people are demanding delivery now, and shorts are being forced to cover their positions. This has a violent impact on the price. 

The paper markets centered in London and New York are losing control of the narrative. China, and to a lesser extent India and Russia are taking over the narrative. Prices will no longer be determined by the paper markets of the West but by the physical markets of the East. 

If you have silver in your possession, sit on it, this is not the time to sell. 

If you don't and are thinking of buying, you will be scared to enter at these levels, but I still think we are only in the middle of a long term bull run. Enter only if you have the stomach for extreme volatility. 

For those who are of a suspicious nature, or inclined towards paranoia, think back to those times when holding gold was illegal. This has been true both in India and in the US. 

You ( I am referring to the paranoid ones like me) may want to consider shifting your holdings to hundred percent physical over the next few weeks or months. 

Talking of gold, it will go up further from this point which is an all time high. 

Silver will go up even more. 

If you are already on the roller coaster, good. The fun ride is not yet over!