SD Bullion Update: Silver Deficit —1.347 Billion Oz and Growing

Key Concepts

• Silver Outflows: Significant withdrawals of silver bullion from major exchange inventories and unsecured ETF warehouses globally.
• Supply Deficits: A persistent imbalance where global silver demand exceeds supply.
• Silver ETPs (Exchange Traded Products): Investment vehicles that track the price of silver, contributing to demand.
• Liquidity Squeezes: Situations where a lack of available metal in the market can lead to rapid price spikes.
• Silver as a Hybrid Currency: The argument that silver, beyond its industrial use, is increasingly functioning as a monetary asset.
• Gold as a Currency/Strategic Asset: Gold's role as a store of value and a long-term portfolio diversifier, supported by central bank buying.
• Central Bank Gold Buying: A significant driver of gold demand, providing a "soft floor" to its price.
• Gold-Silver Ratio: The ratio of the price of gold to the price of silver, indicating their relative value.
• Fiat Currency Debasement: The erosion of the purchasing power of government-issued currencies.
• Asymmetric Trade: An investment with high upside potential and limited downside risk.

Silver Market Dynamics: Outflows and Deficits

The video highlights substantial movements of silver bullion out of major exchange inventories and unsecured ETF warehouses worldwide. This trend is exemplified by the collapsing silver bullion inventories in China's SGE (Shanghai Gold Exchange) and SHFE (Shanghai Futures Exchange) warehouses, with an additional negative 3 million ounces reportedly pulled this week. Historically, these outflows from China have been irregularly large, with comic silver warehouses falling by nearly negative 70 million ounces over the past few months from their recent peak.

Furthermore, for the first time in the 2020s, approximately 3 million ounces of unsecured SLV (iShares Silver Trust) silver holdings were withdrawn from JP Morgan's New York warehouse. These large outflows are attributed to the ongoing global silver supply deficits, where demand consistently outstrips supply.

Metals Focus Analysis: Deepest Supply Shortfall on Record

Silver market analyst Metals Focus reported that the current deficit coincides with a notable rise in silver investment. Silver ETPs are on track for their second-largest annual increase in 2025. When changes in ETP holdings are factored in, the market balance points to the deepest supply shortfall on record. The Silver Institute estimates this shortfall to be negative 295 million ounces for 2025, considering recent large unsecured silver ETF and ETP demand. This means the ongoing silver supply deficit is worse than initially reported when this demand is included. The cumulative deficit over the last seven years, since 2019, is now estimated at an overestimated 1.347 billion ounces, using the Silver Institute's data.

UBS Commentary: Market Tightness and Upside Risks

Swiss bank giant UBS echoed concerns about silver market tightness, stating that risks are skewed to the upside due to the potential for liquidity squeezes to reemerge. They observe the silver market is "increasingly vulnerable to periods of strong investment demand, raising the probability of liquidity squeezes similar to those seen in late 2025 when silver lease rates spiked sharply." Tight inventories, metal shifting between regions, and metal held in non-deliverable forms can intensify short-term dislocations, creating conditions for rapid price spikes when demand surges.

UBS Strategist Joanie Tevis on Silver's Outlook (2026)

Speaking on CNBC India, UBS strategist Joanie Tevis discussed her bank's view on silver into 2026. She expects silver to outperform gold in bursts, acting as a "higher beta expression of the gold trade" and attracting investor flows. Fundamentally, silver has a "compelling story" with expectations of a tight market underpinning prices. However, Tevis noted that any downside in global growth could act as a drag on silver's industrial demand and weigh on investor sentiment. She also characterized gold as a long-term strategic position for investors, while silver is more of a "tactical trade." Unlike gold, silver does not benefit from official sector buying as it's not part of central bank official reserves. Despite these challenges, UBS expects silver to make further highs in 2026, potentially reaching $55 as a first target, with upside towards $60-$65 if gold triggers a stronger rally.

Jim Rickers on Silver's Price Potential and Monetary Role

Bestselling author Jim Rickers, in a discussion with Keith McCulla on Hedgei TV, shared his perspective on silver's price potential. He noted that while gold is a currency, and copper and steel are industrial metals, silver has historically fit into the latter category but is now making a case to be a "hybrid currency" or an "outright currency." Rickers explained that silver is more complex to analyze due to its dual nature: an industrial input and a precious metal. While economic slowdowns might reduce industrial demand, the precious metal aspect means silver will "along for the ride" with gold. He believes that if gold reaches $10,000, silver could reach $100-$150.

Rickers further elaborated on silver's practicality as a currency, especially in scenarios of societal breakdown. He contrasted a $4,000 one-ounce gold coin with an ounce of silver, which historically represented a week's worth of groceries. He recommends holding a "monster box" (500 one-ounce American Silver Eagles) for its potential utility. Regarding price targets, Rickers stated he doesn't have a specific number but believes silver can go "way higher" due to factors like speculative "tourist" behavior in the market and options market dynamics.

Gold Market Dynamics: Underowned and Central Bank Support

UBS strategists also observed that "Gold remains underowned relative to total assets, and we believe there's room for allocations to keep rising." The video suggests this statement might be understated, with significant potential for gold allocations to increase in the future.

Western Investment Fund Managers' Complacency on Gold

The video plans to examine the complacency of Western investment fund managers regarding gold prices for 2026. A recent Bank of America poll of these managers showed a split: one-third bearish (predicting below $4,000/ounce), one-third expecting flat to slightly up prices near $4,500/ounce, and the final third predicting over $4,500/ounce, with about 1/20th anticipating over $5,000/ounce. This suggests gold is viewed as a "cheap call option" amidst ongoing fiat currency debasement.

China's Growing Gold Holdings and Strategy

The video contrasts the "old waning western powers" with outsized gold allocations (over 70% of national savings) with China's efforts to catch up since the 2008 financial crisis. Mainstream media now admits China's gold holdings are likely at least twice what they officially claim. China's State Administration of Foreign Exchange (SAFE), its wealth fund CIC, and the military are all involved in gold acquisition, with no mandate for timely disclosure. China is also the world's largest gold miner and is encouraging developing nations to buy and hold gold, with Cambodia recently announced as a buyer of SGE gold.

Developing World's Record Gold Buying Pace

Since the freezing of Russian US Treasury assets, central banks in the developing world have been buying gold reserves at an unprecedented pace and size. This trend shows no signs of stopping.

Gold Reserves and Mining Potential

Russia and Australia lead in estimated proven gold to mine, with approximately 12,000 tons each. Indonesia, in fourth place, announced a new gold export tax of up to 15% to encourage domestic processing and buying. The video suggests this trend of export taxes on precious metals is likely to grow.

Contrarian Bet: Bullion Over US Stocks

The video argues that gold remains a contrarian bet against historically overvalued asset classes like the US stock market, which relies on "overpromises of AI." The presenter expects the S&P 500 gold ratio to reach its old 2011 lows and go even lower in the 2030s. A similar, more pronounced move is anticipated for silver bullion relative to US stocks, with significant potential gains in the coming decade.

SD Bullion Offerings

The video concludes with a promotion for SD Bullion's early Black Friday offerings, including 90% US silver coinage under spot, US Mint gold bullion coins, and Johnson Matthey 1oz silver rounds.

Conclusion and Takeaways

The overarching takeaway is that the silver market is experiencing significant physical outflows and a deepening supply deficit, driven by strong investment demand. This tightness, coupled with silver's dual industrial and monetary characteristics, suggests potential for significant price appreciation, possibly outperforming gold. Gold, meanwhile, is seen as underowned, with central bank buying providing a strong floor and continued demand expected from both official and private sectors. China's increasing gold holdings and the developing world's record buying pace are reshaping the global gold landscape. The video advocates for bullion as a strategic investment, particularly against the backdrop of fiat currency debasement and overvalued equity markets.