Over the past year, I’ve written no less than 15 newsletters dedicated to silver.
To say it’s one of my favorite assets is an understatement.
The combination of booming industrial usage and rising investor demand has created a perfect storm for poor man’s gold.
And this unique metal is doing quite well, up 72% year-to-date despite the recent pullback. But don’t let that price rise fool you, this bull market has years to go yet.
From 2009 to 2011, silver rose more than 5x. From 2000 to 2011, it rose about 9x. And during the 1970s it went ballistic, rising from $1.50 to $50. The moves in this asset can be simply explosive.
Besides, we haven’t even reached the second wave of inflation yet. And the Fed hasn’t begun the inevitable mega-infinity-QE money printing cycle ahead.
Silver’s move so far is just a warmup. And one signal is telling us there’s still a shortage of physical bullion.
Backwardation is Bullish
There are two price benchmarks for silver. The first is the spot price, and that’s based on the physical market. This is what real world buyers and sellers base their pricing on.
The second benchmark is the futures market. This is based on the price of silver contracts on exchanges like the COMEX. Futures are primarily “paper silver”, meaning they are mostly settled for cash, with far less than 1% being redeemed for actual bullion.
Normally, spot and futures prices are tightly correlated. Futures tend to be priced slightly higher than spot, because, well, they’re in the future. There are storage and opportunity costs to consider.
But over the past few months, the spot price has jumped ahead of futures. The chart below shows the spot price (black) and the December 2025 futures contract price (blue). It covers the past 3 months:
Source: Barchart
Notice how back in August and early September, the futures price (blue) was above the spot price. This is the norm, known as contango.
But then it flipped in mid-September into October, and spot silver prices have mostly stayed above futures since.
This is known as backwardation. Because it’s… backwards. Futures prices should normally trade higher than spot.
So what does backwardation signal? Physical supply shortages. It means there’s not enough silver to meet demand.
Focus on London
A few months back, the LBMA (London Bullion Market Association) experienced severe disruptions in silver deliveries.
The LBMA is a key spot trading hub for silver (and gold). And for a while, they couldn’t meet demand. Deliveries that should take 3 days were taking 8 weeks. They blamed it on physical logistics problems, but some of us suspected there simply wasn’t enough metal in the vaults to fulfill contracts.
Silver lease rates spiked to as high as 34%, up from the typical less ~1%. This spike in lease rates was a HUGE tell that something was very wrong with physical silver markets. Somebody was desperate to get their hands on physical silver, even if it meant paying a 30% APR.
For now, the LBMA squeeze has cooled down a bit. They have managed to source enough silver to meet redemptions, for now.
But some experts, such as David Jensen, say the LBMA remains on the verge of breaking. That they simply don’t have enough metal to meet demand. If the LBMA does run out of silver, we’re going to see some crazy price action to the upside.
Meanwhile, on the other side of the world China just put new export restrictions on silver. I suspect this has to do with the fact that they want to keep the metal in the country to support soaring domestic demand for solar panels and investment purposes.
The Silver Squeeze Ain’t Over
Silver has pulled back from recent highs over $54 to around $50.50 today. A perfectly normal and healthy pullback.
It could have a bit further to fall, but I’m holding strong. If I didn’t already have a large position, I’d be a buyer here. But as always, the recommended strategy is to dollar-cost-average (DCA). In other words, spread your buys out over at least a few months if you’re starting a new position. That way if silver pulls back, you’ll get a chance to buy lower.
Physical silver is one of my favorite ways to play this. And there are a ton of good options. You can buy beautiful 1oz Canadian silver maple leaf or American Eagle coins. There are also larger 5-100 oz bars which offer a bit more value per ounce. You can buy bars cheaply at Costco or a local coin store. Or shop online at reputable stores like SDBullion or Apmex. Just make sure you’re dealing with a reputable business, and paying a reasonable price over spot.
We like silver miners, too of course. Members of Strategic Intelligence can access Jim Rickards and Dan Amoss’ latest silver miner pick, which I think is an excellent choice. For easy diversified access, there’s also the SIL silver miner ETF and the SILJ junior silver miner ETF.
The silver bull market is progressing nicely. But it still has years to run. $100/oz silver is inevitable in my opinion, and depending on how nasty inflation gets, we could easily see $200 by 2028.
The mainstream media is finally recognizing what they call the “debasement trade”. But I like to think of it as the debasement trend, because it’s much more than a short-term fad.
Silver is a great way to play it.
