When Silver Turns Strategic: How India Became Central to a Global Silver Squeeze
Introduction
Silver’s price is what gets noticed.
Silver’s availability is what changes markets.
In the past half-century, silver prices have spiked only three times. January 1980, when the Hunt brothers attempted to corner the market by amassing nearly a third of the world’s supply. Then isApril 2011, during the U.S. debt-ceiling crisis, when silver rallied alongside gold as confidence in fiat systems wavered.
And then again in October 2025 - which continued till the end of the year.
That third episode did not arrive with the usual markers of financial panic. There was no systemic collapse. No emergency stimulus. No sudden supply shock.
Instead, silver price rose steadily through the year and then accelerated sharply. By end of 2025, silver was traded at $70 per troy ounce (one troy ounce is about 31 grams) in the U.S. COMEX at the end of 2025. This reflects a whopping near 140% rally since the start of the year.
What was less visible at first was what happened underneath. According to bullion-market participants quoted at the time, there was effectively no unallocated silver left readily available in London. Some deliveries were reportedly being rerouted by air rather than sea to meet settlement timelines.
The backdrop was already tight. The World Silver Survey 2025, published by the Silver Institute and Metals Focus, shows the global silver market recorded a fourth consecutive annual deficit in 2024, with demand exceeding supply by 148.9 million ounces. Industrial demand reached a record 680.5 million ounces, while global mine production remained around 816 million ounces. Cumulatively, between 2021 and 2024, the market absorbed 678 million ounces more silver than it produced.
That’s the equivalent of nearly ten months of global mine output.
Supply did not collapse.
Circulation did.
By 2025, silver had crossed a threshold. It was no longer just being priced.
It was being rationed by availability.
A Deficit Market that Still Looked Liquid
For most of the past decade, silver appeared resilient to stress.
Mine production fluctuated but held broadly steady. Recycling responded to higher prices. Futures markets on COMEX and OTC desks in London continued to clear large volumes. On paper, liquidity remained intact.
But the composition of demand had shifted.
According to Metals Focus, 50–60% of silver demand is now industrial, and that share has been rising. Industrial offtake grew from roughly 31,000 metric tonnes in 2016 to over 36,000 metric tonnes by 2024, driven primarily by solar photovoltaics, electrification of vehicles, power electronics, and metal-joining processes such as brazing.
Unlike jewellery or discretionary investment, industrial demand does not retreat easily when prices rise. Solar panels, EV components, and electronic circuits embed silver into long-term production decisions. Demand becomes structural rather than cyclical.
This altered how the market responded to stress. When prices rose in early 2025, demand did not fall sharply. Instead, inventories absorbed the pressure.
That elasticity was finite.
Following the Metal: Where Silver Settled
When commodity markets tighten, the first signal is rarely price.
It is inventory behaviour.
London: High Vaults, Low Mobility
London remains the primary settlement centre for the global silver market. It is where metal is custodied, allocated, and pledged against paper contracts.
Data published by the London Bullion Market Association shows that LBMA-tracked silver holdings stood at about 27,000 tonnes in late 2025. That headline figure appeared reassuring. But reporting at the time noted that a significant portion of this metal was allocated to ETFs and institutional holdings, not available as free float.
As one bullion dealer observed, LBMA figures show total metal in vaults, not how much is unencumbered. In tight markets, that distinction matters. Allocated silver exists, but it does not circulate.
By contrast, in June 2022, LBMA vaults held close to 31,000 tonnes of silver. By March 2025, that figure had fallen to around 22,000 tonnes, its lowest level in years, before recovering later in the year as metal was drawn into longer-term holdings.
The recovery did not restore flexibility. It reflected precaution.
New York: Settlement Without Surplus
COMEX inventories told a similar story.
Stocks fluctuated but did not rebuild meaningfully. Reporting during the October squeeze noted that borrowing costs for silver spiked sharply. At one point, overnight borrowing rates reached an annualised 200%, an extreme signal of tightness rather than speculation.
This was not a market lacking silver entirely.
It was a market lacking movable silver.
Tariffs, Ratios, & a Mispriced Signal
To understand why silver accelerated in the second half of 2025, it helps to rewind.
In April 2025, U.S. President Donald Trump announced a broad set of tariffs as part of what was termed “Liberation Day”. Gold and platinum were exempt, classified as essential to the U.S. economy.
Silver was not.
The immediate reaction was counterintuitive. Gold prices spiked. Silver prices dipped. The gold-silver ratio surged above 100, a level historically associated with silver underperformance.
That ratio matters. It measures how many ounces of silver are required to buy one ounce of gold. When it rises sharply, it has often preceded periods of silver outperformance. And true to that, in the months following the announcement, the gold to silver ratio has dropped dramatically from 105 down to around 60 as of writing.
More importantly, the tariff announcement created uncertainty. Risk managers at financial institutions and industrial buyers reportedly became reluctant to release silver inventories, fearing that metal exported from the U.S. might return subject to tariffs of 25–35%.
Metal stayed put. Tightness increased.
The signal was there.
The market simply took time to act on it.
India & The Timing Problem
The next phase of tightening did not originate in policy or production.
It came from India, and from timing.
India is the world’s largest consumer of silver, using roughly 4,000 metric tonnes annually, primarily for jewellery, utensils, and ornaments. About 80% of that supply is imported, traditionally from the U.K., with increasing flows from the UAE and China.
In 2025, India experienced a strong monsoon and a healthy harvest. For a country where roughly 55% of the population depends on agriculture, this matters. Harvest income tends to flow into physical assets rather than financial ones.
And here, silver occupies a particular niche.
It is culturally acceptable, affordable relative to gold (a.k.a the poor man’s gold) and widely trusted.
The harvest season ends in late September. It coincides with Diwali, India’s biggest festival of prosperity. In 2025, as preparations began, Indian silver prices surged to a record ~₹242,000 per kilogram, an 180% increase year-on-year.
Gold, meanwhile, had become expensive. Volumes fell. Buyers pivoted.
A Structural Shift in Indian Silver Demand
What distinguished 2025 from earlier years was not just seasonal buying.
It was what happened next.
As gold volumes remained subdued, Indian demand rotated decisively toward silver. Reporting at the time noted shortages at domestic refineries. Import demand surged.
According to trade data cited by Indian business media, India’s silver imports were expected to reach 5,500–6,000 tonnes in 2025, extending an already elevated trend from 2024. Crucially, much of this demand was investment-oriented.
Retail participation through silver ETFs remained strong even after Diwali. Unlike jewellery, ETF demand immobilises metal. Retail investors tend to buy and hold, not trade.
This altered circulation. Silver entering India stayed off the global market for longer.
China: The New Dimension in the Silver Story
China added marginal friction.
On January 1, 2026, Beijing implemented stringent new rules on silver exports, tightening oversight, licensing and customs procedures for shipments of the metal. According to reporting by CNBC, the new measures require exporters to obtain detailed government permission, including declarations about end-use and destination, in a way that closely mirrors the controls China previously applied to rare earths.
The effect is not an outright ban, but a material increase in administrative friction at the border - the sort that slows movement, raises costs and injects uncertainty into supply chains.
This approach should be familiar to anyone who has followed China’s broader strategy with critical inputs. In Under the Market Lens earlier in 2025, we explored China’s rare earth export restrictions - the way official levers were used not to cut supply outright, but to shape flows by increasing friction, leverage and administrative discretion.
That pattern has now appeared in the silver market. It is not the dominant driver of tightness, but it is a reinforcing one.
Why this matters to prices is not because China alone can move the global market, but because policy uncertainty is itself a price signal. Traders and risk managers adjust behaviour not when an export licence is denied, but when it becomes plausible that a shipment could be delayed, questioned or re-routed at short notice. In a market already strained by structural deficits, strong demand from India and reduced free float in settlement hubs such as London, even marginal increases in trading friction have ripple effects.
In a system already operating without slack, marginal friction mattered.
From Commodity to Contested Input
By late 2025, silver no longer traded like a conventional commodity.
Industrial demand was embedded in it. Indian investment behaviour immobilised it. Policy uncertainty slowed its movement.
Ownership mattered less than access.
Silver became what traders sometimes call the “Devil’s metal”.
Volatile. Difficult.
Prone to sharp moves. But this time, the volatility was rooted less in speculation than in structure.
That distinction explains why silver’s rally differed from 1980 or 2011. Those were driven by financial narratives. This one was driven by physical constraint.
Prices as Signals
Further, silver’s price did not peak because investors suddenly became enthusiastic. It rose because the market struggled to move metal where it was needed.
Volatility reflected uncertainty about availability, not just sentiment. Price became a signal of strain.
That is why silver behaved differently from gold price, even as both benefited from broader demand for real assets amid tariffs, trade tensions, and currency weakness.
Where the Sory Could Still Change
Silver remains volatile.
Higher prices encourage recycling. Technology may reduce silver intensity in solar cells. Indian demand remains sensitive to affordability. And history offers caution. Silver rallies often end abruptly.
In the commodity trading markets, silver is a Cinderella metal. It arrives late, captivates briefly but leaves a major impact, and leaves just as suddenly.
But the structural backdrop today is different.
Demand is more embedded. Supply is slower. And circulation is thinner.
Closing
In liquid markets, price balances demand.
In constrained markets, availability does.
Silver did not become strategic because it was declared so. It became strategic because demand stopped releasing metal back into circulation.
India did not dominate the silver market.
It changed its rhythm.
By absorbing silver into longer-term holdings at a moment when global inventories were already thin, Indian behaviour helped expose a market that could no longer rely on price alone to keep metal moving.
When that happens, prices stop being the headline.
Availability becomes the story.
Silver was only one thread in a much larger year.
Our 2025 Market Recap traces the deeper patterns - from India’s resilience to global realignments.
Read the full edition →
Disclaimer:
This article is for informational and educational purposes only. It does not constitute financial, investment, or trading advice and should not be relied upon as such. There is no guarantee of any investment gains, and readers are encouraged to conduct their own research before making any investment decisions.
Really impressive breakdown of how inventory behavior signals tightness before prices do. The distinction between allocated vs unencumbered silver in London vaults is something I hadnt considered much until seeing how thin float actually gets during stress. What's interesting is thatwhen industrial buyers shift from price-responsive to availability-responsive, the usual elasticity assumptions dunno longer apply. Back in 2020 I saw similar dynamic with PPE supply when availability became more critcal than cost optimization.