TLDR:

• Silver surged 450% to $120 adding $6 trillion in market cap amid five-year supply deficit of 678 million ounces. 
• China export restrictions tightened global supply with Shanghai silver at $127 creating record premiums over markets. 
• Paper-to-physical leverage at 350:1 triggered forced buying as delivery requests exposed severe physical shortages. 
• Lease rates spiked to 39% while backwardation emerged signaling worst physical stress since 1980 silver crisis.

Silver prices have exploded to $120 per ounce, representing a 450% surge over two years. This historic rally added over $6 trillion to silver’s total market capitalization.

The metal now stands as the world’s best-performing asset across all categories. Multiple structural factors converged simultaneously to create this unprecedented price movement. Supply deficits, export restrictions, and paper market failures combined to fuel the explosion.

Unprecedented Supply Crisis Drives Historic Price Action

The current silver explosion stems from years of accumulated deficits rather than temporary imbalances. Bull Theory explained that global consumption exceeded production for five consecutive years before prices began accelerating.

According to the analysis, total shortages reached 678 million ounces during this period. This deficit represents almost one complete year of worldwide mine output missing from available supply.

China’s export restrictions intensified the supply crisis to historic levels. The country controls major portions of global refined silver through processing operations.

New licensing requirements drastically reduced the amount of metal permitted to leave Chinese borders. Physical silver inside China became increasingly scarce as Shanghai prices climbed to $127. Bull Theory noted that this premium over international markets demonstrates the severity of internal shortages.

Industrial demand growth reached levels never previously witnessed in silver markets. Solar panel manufacturing now consumes massive quantities for electrical conductivity requirements.

The report indicates annual solar demand expanding from 200 million ounces to 450 million ounces by 2030. Data center construction, artificial intelligence infrastructure, and grid electrification created additional pressure. These sectors cannot easily substitute silver due to its superior conductive properties.

The paper market’s leverage ratio exposed systemic vulnerabilities at unprecedented scales. Current estimates place paper-to-physical ratios at 350:1 across trading platforms.

Bull Theory highlighted that for every single physical ounce, there are 350 ounces in paper claims. Increased physical delivery demands triggered forced buying as shorts scrambled for metal. This created a self-reinforcing loop pushing prices higher at accelerating rates.

Market Dislocation Reaches Historic Extremes

Lease rates spiked to 39% annualized, indicating the most severe borrowing stress in decades. Normal market conditions maintain rates near zero for precious metals lending.

The explosion to 39% revealed extreme difficulty accessing physical inventory for delivery obligations. Borrowing costs at these levels appeared only during previous historic crises.

Backwardation emerged across silver futures as spot prices exceeded forward contracts. This inversion signals desperate demand for immediate physical delivery over future promises.

Bull Theory observed that market participants last witnessed similar backwardation patterns around 1980 during that era’s silver crisis. The reappearance confirmed structural breakdown in normal supply relationships.

Refining capacity losses compounded the supply explosion by removing 9.7% of global processing ability. Even available raw silver could not transform into deliverable bars quickly enough.

Exchange-traded funds simultaneously absorbed 95 million ounces in early 2025 alone. This removal from circulation eliminated metal that industries and contract holders desperately needed.

Strategic classification by the United States formalized silver’s critical status in August 2025. Government recognition of supply vulnerabilities marked a historic shift from commodity to strategic resource.

Combined with multi-year deficits, Chinese export controls, industrial demand surges, paper leverage collapse, extreme lease rates, backwardation, refinery shutdowns, and ETF absorption, physical scarcity replaced paper pricing.

Bull Theory concluded that the explosion occurred because every major factor aligned simultaneously for the first time in history.