Recently, silver has been reaching new highs continuously, and I have to quickly catch up on related knowledge.

After studying, I found that there are quite a few counterintuitive market logics behind silver.

1. No matter how high the price rises, the supply hardly increases.

The normal logic should be: price skyrockets -> mining companies expand production -> supply increases -> price falls back.

But silver is different because nearly 80% of the silver globally is a byproduct of copper, lead, and zinc mining, and mining companies mainly respond to the prices of copper and zinc, not directly depending on the demand for silver.

2. The more we try to save silver, the more silver we end up using.

This involves the Jevons Paradox, which simply states that technological advances can lead to resource scarcity.

The technology here refers to photovoltaic technology.

The normal logic should be: advances in photovoltaic technology -> reduced silver consumption per cell -> decreased silver demand.

But the result is the opposite; efficiency improvements have made photovoltaics cheaper -> installed capacity has exploded exponentially -> total silver consumption has not decreased but increased.

3, benefiting from both industrial demand and safe-haven demand.

Originally, people only bought silver when the economy was good, and gold when the economy was bad.

After the emergence of AI, countries collectively bet on AI and green infrastructure to avoid economic recession, directly driving a surge in silver industrial demand.

Coincidentally, due to geopolitical factors and debt risks, safe-haven demand has raised gold to high levels, and some of this safe-haven capital has shifted to silver.

Both of these major demands are competing for silver.

4, the inventory is geographically mismatched.

It was originally thought that as long as global inventory was sufficient, prices would be controllable.

But the reality is that most of the silver inventory is concentrated in the United States and locked in ETFs, while the actual physical silver needed in London and Asia has been drained, forcing the local market to use premiums and backwardation to grab the goods, resulting in spot market squeezes.

As for why the inventory is concentrated in the United States, it is because this year the U.S. included silver in the proposed critical minerals list and initiated a 232 investigation, causing the market to worry about future tariffs or various restrictions on silver imports.

Traders, in order to avoid future tariffs and policy uncertainties, have been transporting silver on a large scale from London and Shanghai to the U.S., directly into COMEX warehouses. In addition, domestic mining companies and smelters in the U.S. also tend to stockpile domestically first.

Therefore, most of the inventory has been locked up by ETFs, while prices are determined by that small amount of deliverable goods.

It's not that silver is gone, but there is too little silver available for delivery.