Insights 
VT 
Chinese silver stocks have reached their lowest point in a decade due to record exports and physical market pressures. Warehouse inventories in China decreased by 9,361 kilograms, leaving 531,211 kilograms of silver, marking the lowest inventory level since 2015.
In October, silver exports surged, reaching over 660 tonnes. This move aimed to relieve a supply squeeze that recently escalated prices to record levels. The situation has led to the Shanghai market experiencing backwardation, where near-term silver prices exceed those of future contracts, indicating immediate physical scarcity in China.
The backwardation in the Shanghai market is a strong bullish signal for the immediate future. We believe traders should consider long positions in near-term silver futures, as this price structure indicates that immediate physical demand is far outpacing available supply. This condition is a direct result of Chinese inventories being drained to their lowest point since 2015.
Given the supply tightness, buying call options on silver futures or related ETFs offers a way to capitalize on potential price spikes with defined risk. Implied volatility in silver options has already climbed above 35%, reflecting heightened market anticipation of a significant move. Selling out-of-the-money puts could also be a viable strategy to collect this high premium, betting that the severe inventory shortage will create a floor under the price.
This situation isn’t happening in a vacuum; we see it as supported by strong fundamentals. Industrial silver demand remains robust, with global solar panel installations for 2025 on track to exceed a record 500 gigawatts, severely straining physical stockpiles. This sustained demand from the green energy transition suggests the current tightness is not a temporary anomaly.
Looking back, we saw a similar setup when Chinese inventories reached their lows in late 2015. What followed was a significant rally where silver prices climbed over 30% into the summer of 2016. That historical precedent suggests the current market dynamics could fuel another extended run higher in the coming months.
The record Chinese exports to London show this is a global squeeze, not just a regional one, which is why COMEX front-month futures recently broke above $35.50 per ounce. We are also evaluating calendar spread strategies to directly profit from the backwardation. This involves buying the tighter front-month contract while selling a later-dated one, a trade that will be profitable if the supply squeeze intensifies.
