The Silver Short Squeeze Drama in 2025: India's Influencer, China's Holidays, and the London Run on the Bank

A perfect storm has swept through the global silver market. The retail frenzy ignited by Indian social media influencers, supply disruptions caused by holidays in China, and the depletion of London gold inventories have collectively triggered the most severe silver market crisis since the Hunt brothers' manipulation in 1980.

Last Friday, after silver prices hit a historic high of $54 per ounce, they plummeted by 6.7%, highlighting extreme market pressure. India's largest precious metals refinery has historically depleted its inventory, with its trading head Vipin Raina stating that such a crazy market has not been seen in 27 years. Major banks like JP Morgan temporarily halted silver supplies to India, with deliveries not expected until November at the earliest.

The root cause is the long-term structural imbalance in the silver market, which may be the "culprit."

Indian Retail FOMO Frenzy

Before this year's Diwali festival in India, investment banker and "Indian influencer" Sarthak Ahuja stated on social media that silver was undervalued compared to gold, encouraging purchases, which ignited a frenzy online. Traditionally, Indians buy gold during Diwali, but this year, silver demand surged to unprecedented levels.

As a result, silver premiums soared to over $5 per ounce, far exceeding the normal few cents spread. A bidding war erupted in the Mumbai gold market, with large buyers more concerned about supply than price. Fund companies were forced to suspend new subscriptions for silver funds, with Kotak, UTI, and funds operated by the National Bank following suit.

Analysts pointed out that the FOMO effect has played an unprecedented role in the Indian market.

London Market Liquidity Collapse, New York Inventory Urgently Mobilized

While demand surged in India, Chinese factories were closed for holidays, leading global supply to concentrate in London.

However, the freely available inventory in the London market has fallen to less than 150 million ounces, while the daily trading volume is about 250 million ounces. Overnight borrowing rates once soared to an annualized 200%, and major banks withdrew from quoting, with bid-ask spreads widening to nearly untradeable levels.

Traders described that clients borrowing silver repeatedly inquired about borrowing costs, and when banks could not extend the terms, clients even shouted over the phone. Swiss precious metals refiner Argor-Heraeus stated:

There is almost no liquidity in the London market for leasing; we have basically stopped all non-contractual acquisitions.

In the face of the supply crisis in London, traders turned to New York Comex inventories. Over the past two weeks, Comex inventories have decreased by more than 20 million ounces, marking the largest decline in 25 years. Traders have been transporting silver to London to alleviate the squeeze, but logistics are complicated, and customs delays could lead to skyrocketing extension costs. Potential mineral tariffs that Trump may introduce also increase arbitrage risks.

Outbreak of "Long-term Structural Imbalance" in the Silver Market

This crisis is not a sudden event but rather a concentrated outbreak of years of structural imbalance.

According to data from the Silver Institute, silver demand has consistently exceeded mine and recycling supply over the past five years, resulting in a total gap of 678 million ounces—largely attributed to the boom in the photovoltaic industry. Photovoltaic demand has more than doubled during this period, while total inventories in London were about 1.1 billion ounces at the beginning of 2021 Since the beginning of this year, market pressures have been continuously accumulating. Concerns that silver may be affected by Trump's reciprocal tariffs have prompted traders to preemptively move over 200 million ounces of the metal into New York warehouses in an attempt to avoid potential tariffs. Beyond the inventory shift driven by tariffs, global ETFs have absorbed over 100 million ounces of silver in the first nine months of this year, and this wave of precious metal investment demand has also propelled gold to break the $4,000 per ounce mark for the first time.

These two major trends have jointly depleted London's reserves, reducing the available metal that supports a daily trading volume of about 250 million ounces to dangerously low levels.

TD Securities analyst Daniel Ghali has been warning for over a year that the London market is laying the groundwork for a run on the bank. Just days before the peak of the run, he released a report suggesting that the end was near and advised clients to short. He judged the peak too early, as prices continued to soar. However, by last Friday, the market moved again in the direction he predicted, with silver prices plummeting over 5% at the close.

Ghali stated that as silver begins to flood in (not only from New York but also from as far away as China), further price pressure may emerge:

Logistics are indeed more complicated than we initially assumed. We did not anticipate such a large-scale retail buying frenzy occurring globally while the London market was experiencing a run