Silver's Historic Surge

Why the White Metal Just Jumped 9% in a Single Day

Executive Summary

December 26, 2025, will go down as one of the most remarkable days in silver market history. The precious metal that has already dazzled investors with a 162% gain this year surged another 9%, breaking through the $75 per ounce barrier for the first time ever. Understanding why requires peeling back layers of complexity that most financial reporting ignores entirely—particularly the stark divergence between paper silver derivatives and physical bullion, and the geopolitical chess match being played between Washington and Beijing over critical mineral supply chains.

The surge represents a convergence of multiple factors: the aftermath of October’s historic short squeeze, ongoing physical supply constraints driven by a Commerce Department critical minerals probe, and unprecedented investment demand flowing into precious metals ETFs.

1. Background

1.1 The October Short Squeeze

The foundation for today’s surge was laid in mid-October 2025, when the London Bullion Market Association’s silver market experienced what traders are now calling a historic supply squeeze. For several hours, trading in London-based silver markets essentially seized up as physical inventories evaporated and the cost of borrowing the metal to deliver against short positions spiraled higher.

Approximately 75 million ounces of silver have exited Comex vaults in New York since early October. This represents a staggering physical withdrawal—roughly 2,300 metric tons of the white metal leaving the primary delivery mechanism for global silver futures in just over two months. The exodus occurred because traders worldwide recognized that physical delivery obligations were becoming increasingly difficult to satisfy.

The October squeeze sent London spot prices soaring above both Shanghai and New York levels, creating arbitrage opportunities that should have allowed metal to flow from lower-priced markets to higher-priced ones. However, the metal didn’t move as freely as economic theory would suggest. The reason lies in a confluence of factors that have created what analysts describe as “lingering supply dislocations” across major trading hubs.

1.2 Paper Silver vs. Physical Silver

Understanding silver’s price action requires grasping a fundamental distinction that separates it from virtually every other major financial asset: the ratio between paper claims on silver and actual physical bullion is extraordinarily lopsided compared to other commodities.

When an investor purchases a silver futures contract on Comex, they are agreeing to buy or sell a specified quantity of silver at a future date. The vast majority of these contracts are never settled through physical delivery—participants simply roll their positions forward or close them out before expiration. However, when short sellers are forced to deliver against expiring contracts, they must source actual silver from approved vaults.

The paper market for silver—comprising futures, options, and OTC derivatives—dwarfs the physical market by a factor that some analysts estimate at over 100:1. This creates enormous leverage and potential for short squeezes when physical supply tightens.

2. Key Drivers

Driver	Evidence & Sources
Physical supply withdrawals from Comex vaults (~75 million oz since October)	Bloomberg News, Dec 2025
Critical minerals probe creating de facto export restrictions	Yahoo Finance, Dec 2025
ETF inflows supporting prices	Bloomberg News, Dec 2025
China-US tensions over strategic supply chains	Yahoo Finance, Dec 2025
Industrial demand from semiconductors and green energy	Industry analysis

3. Implications

3.1 Short-term Outlook (Next 12-24 Months)

Silver futures on the Chicago Mercantile Exchange’s Comex division traded at approximately $78.80 per ounce, representing a near-10% intraday gain. The iShares Silver Trust (SLV), the world’s largest silver-backed exchange-traded fund, jumped 9.05% on the day. The Sprott Physical Silver Trust (PSLV), which holds actual allocated bullion rather than derivatives, rose 8.64%—a smaller percentage gain that itself reveals something crucial about current market dynamics.

For context, gold has gained approximately 74% in 2025, meaning silver has more than doubled gold’s performance on a percentage basis this year. This divergence suggests the current rally has further room to run if physical constraints persist.

3.2 Medium-term Outlook (2-5 Years)

The critical minerals probe must be understood within the broader context of deteriorating US-China relations and the Trump administration’s stated goal of reshoring critical supply chains. Silver’s classification as a critical mineral triggers provisions of existing trade law designed to reduce US dependence on foreign supplies of strategically important materials.

The Commerce Department’s investigation examines whether China’s “increasingly aggressive and sweeping non-market policies” in the semiconductor sector extend to silver and other critical minerals. This uncertainty has created a de facto embargo on silver exports from US vaults as traders wait for the outcome.

3.3 Risks & Counter-forces

• Resolution of the Commerce Department probe removing export uncertainty
• Profit-taking by institutional investors with large positions
• Strengthening of the US dollar if rate cut expectations diminish
• Increased mine supply as producers respond to higher prices

4. Strategic Outlook

The distinction between paper and physical silver markets has never been more stark. While derivatives continue trading on CME, COMEX, and other venues, actual physical metal has become increasingly difficult to obtain for delivery. This divergence creates conditions where prices can move dramatically as participants adjust positions against a shrinking physical base.

The China-US dynamic adds a geopolitical dimension to what might otherwise be viewed as a straightforward commodities play. Silver has become entangled in broader strategic competition over critical mineral supply chains, transforming it from a relatively obscure industrial metal into a potential lever of economic statecraft.

5. Conclusion

Silver’s 9% surge on December 26, 2025, represents the culmination of multiple convergent forces rather than any single catalyst. The October short squeeze revealed fundamental physical supply constraints that have not been fully resolved despite subsequent inflows of approximately 54 million ounces to London vaults. The US Commerce Department’s critical minerals investigation has created de facto export restrictions from the world’s largest physical silver repository at a moment when Chinese demand is surging.

For investors, the current environment presents both opportunity and danger. The structural supply constraints that have driven prices higher could persist for months or even years if policy uncertainty remains elevated. However, the leverage inherent in paper silver markets means that any reversal could be equally violent.

What seems clear is that the silver market of late 2025 bears little resemblance to its historical patterns. The combination of unprecedented investment demand, constrained physical supply, and geopolitical uncertainty has created conditions that could sustain elevated prices for the foreseeable future.

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Sources:

1. Yahoo Finance, “Stock Market Today: Dow, S&P 500, Nasdaq Notch Solid Weekly Gains to Begin ‘Santa Claus Rally’ Period,” December 26, 2025. https://uk.finance.yahoo.com/news/stock-market-today-dow-sp-500-nasdaq-notch-solid-weekly-gains-begin-santa-claus-rally-21012.html

2. Yahoo Finance, “Silver Hits Fresh Record After Topping Peak From October Squeeze,” December 2025. https://finance.yahoo.com/news/spot-silver-hits-fresh-record-14-16-45-431.html

3. Yahoo Finance, “Stock Market Today” coverage, December 26, 2025.

4. Bloomberg News, “Gold and Silver Smash Records Again as Rally Gathers Momentum,” December 2025.

5. Bloomberg News, “Why Silver Price Has Been Surging Even More Than Gold,” December 3, 2025. https://www.bloomberg.com/news/articles/2025-12-03/silver-price-hits-record-high-why-it-has-been-surging-even-more-than-gold

6. Yahoo Finance, “Silver, Copper Hit Records as Trading Turmoil Exacerbates Moves,” December 2025. https://finance.yahoo.com/news/copper-surges-record-bullish-forecasts-15-23-90-68.html

7. Yahoo Finance, “US Holds Off on New Chinese Chip Tariffs Amid Trump-Xi Truce,” December 2025. https://finance.yahoo.com/news/us-holds-off-chinese-chip-15-55-41602.html

8. Bloomberg News, “US Holds Off on New Chinese Chip Tariffs Amid Trump-Xi Truce,” December 23, 2025. https://www.bloomberg.com/news/articles/2025-12-25/us-holds-off-on-new-chinese-chip-tariffs-amid-trump-xi-truce

9. Yahoo Finance, “Gold climbs above US$4,500 in historic rally for precious metals,” December 2025. https://sg.finance.yahoo.com/news/gold-climbs-above-us-4-213400319.html

10. Yahoo Finance, “Silver Hits Fresh Record After Topping Peak From October Squeeze,” December 2025. https://finance.yahoo.com/news/silver-hits-fresh-record-topping-peak-160045431.html