Finishing 2025 as the top-performing asset, silver's price surged by an extraordinary 26% in the final month of the year. While such a rally invites comparisons to past iconic silver market episodes, experts emphasize that the current environment is far from a mere repeat of past price spikes induced by speculative excess or monetary policy panic.
Historically, two prominent silver price surges stand out: the 1980 Hunt brothers' effort to corner the market and the 2011 rally triggered by quantitative easing fears. Both episodes, however, unfolded under vastly different market conditions compared to today.
Supply Deficits Redefine Silver Market Fundamentals
In 1980, the Hunt brothers' attempt to wrest control of the modestly sized silver futures market was facilitated by leverage and ample physical inventories. The market correction followed swift regulatory responses, including margin increases and restrictions to liquidation-only trading, which dismantled the speculative corner.
The 2011 silver surge was propelled partly by ETF inflows as investors sought a hedge against QE-driven inflation concerns. At that time, industrial demand, primarily from solar and manufacturing sectors, was comparatively modest. Large above-ground stocks and Western vault reserves provided a buffer that could replenish supply once investor panic subsided.
Contrasting those scenarios, the contemporary silver market is characterized by a sustained physical deficit. Demand from industrial applications—especially the solar energy sector, electric vehicles, and electronics—has escalated sharply. Silver's mine production and recycled supply have failed to keep pace, steadily draining inventories. This persistent undersupply, combined with rising geopolitical controls over metal movement, represents a fundamental shift in silver's market dynamics.
This realignment in supply and demand has naturally influenced investor behavior. As veteran trader Francis Hunt highlighted in a recent discourse for Commodity Culture, there is a growing erosion of trust in Western financial systems. Investors increasingly prioritize physical possession and control of silver bullion over paper representations, reflecting a deeper structural adjustment in market psychology.
Impact of Elevated Margin Requirements on Market Participation
The Commodity Exchange (COMEX) has responded to these conditions with a series of significant margin increases on silver futures contracts. The initial margin for the standard 5,000-ounce contract has escalated from $20,000 to $25,000 and most recently to $32,500, constituting an approximate rise of 62.5%.
Such margin hikes aim to temper speculative excess and stabilize the thinly traded market. According to Hunt, while these adjustments have curtailed volatility by compelling leveraged speculators to exit, they do not generate additional physical silver supply. Moreover, short sellers confront increased margin requirements alongside heightened challenges in procuring bar-sized metal suitable for futures settlement.
Therefore, although margin policies can restrict trading participation and induce price oscillations, they are inadequate mechanisms to address the long-term structural imbalance caused by years of excessive consumption relative to supply.
China's Strategic Influence on Silver Export Flows
Geopolitical developments further complicate the silver market. China, a dominant force in silver refining and a significant producer, has reclassified silver as a strategic commodity. This policy shift does not amount to an outright export ban but enforces strict control through a licensing regime involving 44 authorized companies.
Consequently, every silver export from China is subject to political approval, transforming the movement of silver into a tool of state policy rather than a purely market-driven activity. As Hunt observed, Beijing has precise knowledge of every ounce exported and the entities involved.
The intertwinement of China's dominant refining capabilities and political control over silver flows further restricts the availability of tradable physical silver on the global stage, reinforcing the market's tight supply conditions.
Escalating Divergence Between Paper and Physical Silver Prices
The cumulative effect of supply shortages, heightened margin requirements, and geopolitical controls has manifested in a pronounced disparity between silver futures prices and physical silver costs.
As of last Friday, the most actively traded COMEX March 2026 futures contract closed at approximately $72.27 per ounce. Meanwhile, within Dubai—an established global bullion trading hub—the lowest-priced one-ounce silver coin was trading near $99.93.
This price gap roughly equals the entire ounce's recent historical trading value, signifying an abnormal fabrication premium that transcends traditional market factors. This substantial spread underscores the dislocation between paper-based contracts and tangible metal, emphasizing that only the physical silver possesses direct applicability for melting, soldering, and powering diverse technological applications worldwide.
Conclusion
Silver's market at the start of 2026 is shaped by enduring supply deficits, surging industrial demand, strategic geopolitical restrictions, and regulatory responses. These elements collectively foster a disconnection between futures prices and physical metal costs, signaling a fundamental transformation in how the silver market operates and how participants interact with silver as both a commodity and a financial asset.