What in the world is happening with Silver?

Lots of buzz going into the weekend on Silver and the spike that’s quietly been happening through the month of December running into the record high we saw at closing yesterday. The market is indeed volatile and much of it is being driven by an increase in industrial demand. As with everything its creating fear among the doomsayers and, as usual, there’s nuggets of truth hidden in there along with a ton of fluff. Bottom line up front – Silver is the latest move in the trade war between the East (BRICS) and the West (Breton Woods / US Dollar).

I’m not one of the doom and gloom soothsayers in the market. As a rule I stack precious metals (PMs) as an investment long term as a hedge against inflation and have done so for decades now. Silver has traditionally been a safe investment as well as a sound secondary trade medium and continues to be so. And while the big banks certainly invest in physical silver for the same reasons, overall market demand has remained steady for bullion as an investment tool for that purpose. No one to my knowledge has over leveraged investments in one precious metal or another and I find it pretty comical for those claiming that they have. Usually there’s a rub buried in such claims always tied to enticing the reader to invest in PM notes. Such a thing is a fool’s endeavor. PMs should only be considered as a tangible asset, nothing more, nothing less. I’m not saying the Schiffs of the world are always wrong, mind you (they’re not) but rather there’s a myopic focus on singular events that leave out the big picture.

What is happening, however, is more concerning. China has announced a tightening on Silver exports coming on the 1st of January. This move is part of a significantly larger strategy to balance trade negotiations in their favor while boosting their own reserves for industrialization. The US made power moves just one year ago sealing the oil market in the Middle East in the West’s favor when it overthrew Basar al Assad in Syria. This was a larger strategy at work manifested in the downfall of the old oil cartel, most notably promoted by Libya’s Qaddafi, with the end goal of isolating Russian (and by proxy, China) influence in oil futures. The situation leaves Venezuela as the lone secure Rosneft-aligned producer in that regard, now squarely in the sights of the US with a current naval blockade. The writing is on the wall: oil futures are squarely set by the Western powers.

The world futures market is not solely hinged upon oil. Rare Earth Elements are the second big market that you may or may not have heard about with China squarely in control. This is the market driving innovation in the tech sector and a key component in the AI race. As most know the US lags far behind both in manufacturing of tech as well as the holdings themselves. While moves have been made in the current Trump administration many recognize that its a decades long process to exert any greater degree of control, a critical weakness being the rather fickle long term US economic strategy based largely on a compromised political party. The gains made can be erased in one election cycle and everyone knows it even if they don’t want to say the quiet part out loud.

What does this have to do with the Silver market? Silver represents the most important part of industrial manufacturing in the critical tech industry. And the world’s largest producer of Silver just so happens to be Mexico, which is strongly aligned with Chinese interests. It is not that there is an actual shortage, but rather a shortage to the West is being created in real time. Production quotas are remaining consistent if not increasing due to the steady increases in valuation over time. But China has decided to put a lid on the supply accessible to the West.

What does this mean for you? Understand that while Silver, like all bullion, is a hedge against the continuing devaluation of the Dollar, the two are largely mutually exclusive. Banks do not set monetary policy based on the price fluctuations of market bullion. Its the other way around. In addition, the price spike is also not likely due to Silver itself being undervalued, as is commonly being claimed, but rather its a temporary rally based first on expected Chinese export policy controls and in turn investor fears of a looming shortage. China’s strategy is about raising prices to limit competition as a counter move to the US hegemony of the Petrodollar.

This ain’t the big one, folks, but other metals like Copper may very well cause second and third order effects particularly in the over-leveraged US housing market which never recovered from 2008. China recognizes this as a cornerstone of refined copper production and the quiet 42% spike in the overall Copper market this year. What I do anticipate is a market correction based on rapid increases in the price of Copper near term more so than the effects of Silver. Both represent a serious weakness in long term US trade strategy providing economic weapons to be used against us in the near future.

Short term, Silver is going to continue to see an increase in price due to investor panic through Q1 26. Hold what you’ve got and resist the urge to cash in – the market is going to slow back down and with it the prices. And while the days of $24/oz Silver are probably behind us, I do expect a market correction back to pre-November prices once the dust settles. If you’ve held off on investing in PMs, now ain’t the time. I’m not exactly saying its a pump and dump, but it certainly is following the market trends of one. Just one man’s opinion. – NCS