Technically, silver has been overbought since September, and while the momentum has been relentless, sellers are starting to emerge, increasing the risk of broader profit-taking. Many traders are eyeing opportunities to buy into weakness, but the ongoing bull trend could face a setback if we see a daily close below $50.01 (Monday’s low) or $49.80 (the April 2011 high). A close below the 5-day EMA would also signal a potential shift in bullish momentum and could lead to more volatile, whippy price action.

From Central Banks to Momentum Traders What began as a move driven by central bank reserve accumulation and concerns over future U.S. deficits has evolved through several phases — from an institutional portfolio rotation to a momentum-driven rally, and now to mounting concerns about physical silver shortages. This progression reflects how silver’s narrative has broadened — from macro-thematic allocation to outright supply-demand tension, now dominating market psychology. 

Silver remains far less liquid than gold and continues to fall under Trump’s Section 232 review of critical minerals and potential import tariffs — a list from which gold has since been removed. At the same time, soaring demand from India has intensified the global rush to secure whatever physical supply remains available. Reports of a scarcity in India has seen Indian silver futures trade to a strong premium to other futures exchanges. 

One-month silver lease rates have surged to 33%, underscoring the escalating cost of borrowing physical silver. Traders rolling short positions are being squeezed aggressively, amplifying an already powerful short squeeze dynamic.

This shortage is also reflected in the premium between spot and COMEX futures. Last week, the spread blew out to $2.63, before narrowing to $1.98. While that retracement seems steep, it’s noteworthy that spot silver typically trades at a discount to front-month futures — highlighting just how extreme current supply stress has become.

Adding to the strain, reports suggest that the Perth Mint in Western Australia has run dry of physical silver and temporarily suspended sales. This development has only deepened market anxiety about the true extent of available global inventory. 

The silver ETF market is also showing cracks. Several ETF providers have halted new inflows, unable to source sufficient physical metal to keep their funds’ prices in line with net asset value (NAV). The SLV ETF reportedly had to purchase 15,000 tonnes of silver last week alone to meet investor demand. If concerns grow about the ability of ETFs to function efficiently, fear of limited accessibility — rather than speculation — could drive silver even higher. 

A Rally Fueled by Scarcity and Sentiment Silver’s rally has evolved through multiple distinct phases and now appears driven by genuine supply scarcity. While it’s difficult to chase a market this hot — and positioning is clearly crowded — further upside remains plausible. Should lease rates continue to climb and inefficiencies expand across the futures and ETF markets, XAGUSD could enter a new, even more explosive leg higher — underscoring that in today’s environment, scarcity itself has become the most powerful catalyst of all.