In recent days, we have witnessed a sharp rise in the price of silver, especially on Asian markets. At first glance, it may look like yet another speculative wave. But a closer look reveals that this time it is something far more fundamental: physical metal is disappearing from the market.
On the Shanghai exchanges, silver is trading above $100 per ounce. However, this is only a nominal price. Once someone actually wants to take delivery of the metal, they must pay 13% VAT. The real price of physical silver therefore rises significantly—roughly to $115–117 per ounce.
And this is where things start to get interesting.
Imported Silver Is Cheaper Than Domestic Supply
Silver imported into China is also subject to VAT, but even after including transportation, insurance, and packaging costs, it still comes out cheaper than silver available directly on the Shanghai exchanges. The difference is approximately 8–10%.
This creates a strong incentive to import physical metal from abroad—and at the same time clearly shows how aggressive real demand for silver has become. The market is willing to pay a premium simply to obtain the metal at all.
This is not a normal situation. This is a sign of stress.
Monetary Expansion and the Flight to Hard Assets
China has massively expanded its money supply in recent years. Official data show that Chinese M2 is now more than twice that of the United States, despite the fact that the U.S. economy is significantly larger in nominal GDP terms.
Such a pace of monetary expansion cannot go unnoticed. Households and institutions alike are looking for ways to protect purchasing power, and the choice often falls on gold and silver—not because they are seen as an “investment,” but because they serve as insurance against currency debasement.
London Is Losing Control Over the Price
For decades, the global precious metals market operated on a simple principle: most trading was done on paper. Contracts were rolled over, settled in cash, and only a tiny fraction of participants ever demanded physical metal.
This mechanism allowed prices to be kept low—as long as no one actually wanted delivery. That is now changing.
Silver shortages are being reported not only in Asia, but also in the United States and Europe. Retail inventories are vanishing. Large dealers have silver only sporadically available. Most importantly, the number of entities demanding physical delivery rather than paper promises is growing.
If the London market truly has billions of ounces of silver “covered” on paper, then it only takes a small percentage of contract holders to request delivery for the system to run into trouble—because that silver simply is not there.
It’s Not Just About Metal. It’s About Trust.
For many years, the entire financial system rested on a narrative of responsible monetary policy, stability, and control. Gold and silver were kept subdued so as not to disrupt that story.
Today, we are seeing the opposite. Rising precious metals prices are not the cause of the problem—they are the consequence.
Once people begin abandoning paper promises and demanding real assets, the rules of the game change. And with them, the price.
What Follows From This?
Not owning gold or silver today is no longer a matter of opinion, but of strategy. This is not about speculating on price appreciation. It is about protection against systemic risk that is gradually coming to the surface.
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