Silver Shortage Grips Global Market, London Feels the Squeeze

London's silver market is facing a crisis as a silver shortage in India reverberates across the globe. The confluence of increased industrial demand, dwindling stockpiles, and a surge in buying during India's festive season has created a perfect storm, leaving traders scrambling and prices volatile.

The roots of the crisis can be traced to India, the world's largest consumer of silver. As the country celebrates Diwali, a festival where purchasing precious metals is considered auspicious, a social-media-driven frenzy to buy silver has exacerbated already strained global supplies. With gold prices soaring, many Indians turned to silver, believing it was poised for a similar rally. This surge in demand led to temporary halts in physical silver trading within India. MMTC-Pamp India Pvt, India's largest precious metals refinery, even ran out of silver stock for the first time in its history.

The Indian buying spree has had a ripple effect, reaching the London Bullion Market. International investors and hedge funds, viewing precious metals as a safe haven amid US dollar instability, have joined the buying frenzy. This further depleted silver inventories in London, a key hub for global silver trading. Data from the London Bullion Market Association (LBMA) indicates that silver stocks in London have fallen by over a third since mid-2021.

The overnight borrowing rate for silver on the London Metal Exchange (LME) spiked to an annualized 200%. Spot silver prices, which had been around $30 per ounce, surged to a record high of $54.15 per ounce on October 16, 2025, before falling as much as 6.7%. Such volatility signals extreme stress within the silver market. Some traders have described the market as "all but broken," with major banks reluctant to quote prices amidst frantic client calls.

Several factors have contributed to the global silver shortage. A primary driver is the increasing industrial demand for silver. Silver is a critical component in electronics, electric vehicles, solar panels, and medical equipment. In particular, the growing renewable energy sector has significantly increased silver consumption, with solar panel manufacturing alone requiring over 230 million ounces annually.

On the supply side, silver mine production has struggled to keep pace with rising demand. Silver is often extracted as a byproduct of mining other metals, limiting the ability to quickly increase production in response to price increases. Declining ore grades, limited exploration investment, stricter environmental regulations, and rising production costs have further constrained silver mining output.

The global silver market has been facing a structural deficit for several years. This means that demand has consistently outstripped supply, leading to a drawdown of existing silver stockpiles. The Silver Institute estimates that the global silver inventory deficit for 2025 will be 118 million ounces.

The current crisis has drawn comparisons to the "silver crisis" of the 1970s and 80s, when the Hunt brothers attempted to corner the silver market. However, unlike that situation, today's crisis is driven by a combination of soaring industrial demand and constrained supply. The shortage has made it difficult for jewelers and manufacturers to meet demand, disrupted supply chains for industrial users, and prompted silver ETFs to suspend new subscriptions.

The situation remains fluid, with analysts predicting continued price volatility and tight supplies in the near term. The silver shortage highlights the metal's critical role in both industry and investment, and the challenges of ensuring a stable supply in the face of growing global demand.