Silver’s Split-Screen: China Restocks, Curves Invert, and the West Blinks as the Door Narrows
Copy link
Some weeks the silver market shouts in price. This one spoke in ledgers, and the ledgers all told the same story: China has been buying time with bars, futures curves are paying for “now”, and Western inventory comfort is thinning just as public money is waking up to the asset again. Stitch the week together and you get a simple message with complicated consequences—low inventories plus strong demand equals backwardation, and backwardation plus a small physical pipe equals fast repricings.
The turn started quietly and then accelerated. On 3 December, Shanghai’s exchange vaults recorded their largest weekly inflow in three months, adding 68 tons to reach 627 tons (≈20.1 million oz). A few days later the pace quickened—“Stacking, Week #2”—with +95 tons taking stocks to 654 tons (≈21.0 million oz). And by week’s end, China had its largest weekly inflow in 17 months: +129 tons to 688 tons (≈22.1 million oz). It’s a stark reversal from the four-month stretch that decimated Shanghai inventories by 61% (–793 tons); the market that had spent the autumn bleeding metal is suddenly drawing it back in.
This is not a sentimental rotation. It coincided with price and participation that left little doubt about intent. Shanghai silver printed a new all-time high, with Feb’26 futures closing 2.46% higher at ~US$59.05/oz, and—history made—spot traded over US$60/oz for the first time, ¥13,810/kg (~US$60.75/oz). Open interest on the SHFE rose 10.6% week-to-date to 789,444 contracts, proof that this wasn’t a one-way liquidation squeeze—it was a crowd leaning into the move.
The term structure said the quiet part out loud. Backwardation widened across Shanghai’s forward curve as the restock gathered speed. The Apr’26–Feb’26 spread moved from –¥33/kg to –¥49/kg; Jun’26–Feb’26 from –¥53/kg to –¥77/kg. Translate the math: the market is discounting later delivery more deeply because near-dated ounces are the scarce thing. That is exactly what you should expect when a region both rebuilds inventory and accelerates usage at the same time—fabricators, wholesalers and investors all tugging on the same pipe, with the calendar priced as a rationing device.
Even after the inflows, Shanghai’s vault level sits far below mid-year peaks. In that context, the +129-ton week is best read as catch-up, not glut. The curve agrees.
While Shanghai was making records, US screens were, at times, soggier—“CME is down but silver is roaring in China.” Don’t overread the split screen. Time-zone divergence is a feature of tight markets, not a bug. The plumbing is what matters: China’s basis ran persistently rich—~2.55% premium to LBMA around US$55.2/oz on 28 Nov—while the SHFE curve stayed slightly backwardated even on quieter days. Those signals say demand for immediate metal closer to end-use remains strong. New York typically catches up as the curve and ETFs transmit the impulse.
In the West, the public footprint showed up in two places. First, Sprott Physical Silver Trust (PSLV) added ounces again: +1,470,800 units to 597,351,690 on Friday, then +3,644,658 units over the following two sessions to 599,525,548. Because PSLV is fully allocated, unit growth equals bars in custody. This is investors sequestering metal, not renting exposure.
Second, the US ETF complex leaned bullish. SLV pressed toward its $50 call wall, with traders “racking up calls” and the put/call open-interest ratio falling—classic upside-convexity appetite. Volatility confirmed the mood: the options term structure showed inversion (near-dated implieds higher than deferred), and skew remained expensive, even as buyers kept reaching for OTM calls. That profile is not mania; it’s a market paying for the right to be early if tightness migrates down the curve.
The divergence with gold was striking enough to earn its own caption: “A tale of two worlds.” While silver sizzled—trading above the $50 call wall, printing inverted IV term structure, and closing within 1.6% of $60/oz in China—gold activity stayed muted. Part of that is just door size: the gold ocean can absorb big flows without moving the shoreline; silver’s pool cannot. Part of it is use case: silver wears two hats (monetary and industrial), and when both tip in the same direction—as they did this week—the pipe runs thin quickly.
The Western warehouse line didn’t contradict the story; it completed it. COMEX silver inventories hovered near an 8½-month low around 456 million ounces. That is not a crisis number, but it is not a comfort number either—especially when deferred paper is asked to fund near-dated delivery. No surprise, then, that the Dec’25 COMEX contract traded below spot (about –US$0.40/oz, or –0.76% at one point), the Western echo of Shanghai’s message: now is worth more than later.
It is tempting to see +129 tons into Shanghai as “supply returning, tension easing.” That would be a misread. Backwardation widened while the bars arrived; premiums to LBMA persisted; and open interest rose. In other words: the market is buying and storing because it needs metal, not because it can’t think of anything else to do with cash. When a drought finally gets rain, the soil drinks it; rivers don’t instantly flood. Levels and flows are different variables. The level is still lean. The flow just turned positive—into a lean base.
Tight episodes in silver are not all the same. The 2020 logistics squeeze was about planes, kilobars and refinery throughput. 2011 was about speculative velocity and ETF flows. This one has a different signature: industrial pull, investment restock, and public call-buying arriving together into shrunken Chinese inventories and lower Western warehouse comfort. It’s procedural tightness, not theatrical. That makes it stickier. It doesn’t need a single headline to persist; it needs time and imports to unwind.
For bullion desks, the playbook is boring in all the right ways. Replacement cost, not bravado, wins these weeks. With Shanghai premium positive, SHFE spreads negative, and COMEX front discounted, the firm that stages deliverable inventory in friction-light hubs (Singapore and London) captures the spread. Quote certainty, not cleverness. Replenish before calendar bottlenecks. And remember that public call-fever (SLV’s wall) can create gamma air-pockets; manage quotes with that in mind when US hours light up.
If you’re a conservative allocator—PMET, civil servant, family balance-sheet manager—this tape argues for quiet accumulation, not leverage. PSLV’s unit growth shows how to do it: fully allocated exposure that turns premium chatter into custody. Ladder purchases; don’t chase green bars. Recognize that silver’s door is small by design, which is why $60+ printed so quickly in China once inventories stopped falling. Small doors cut both ways. Your edge is time, not bravado.
Shanghai traders aren’t shouting “moon”; they’re mapping the curve. With the Feb’26 contract near $59 when it tagged the high, the widely watched ¥15,900/kg marker (≈US$70/oz) is less prophecy than a level where optionality and inventory math meet. If the backwardation persists and restocks cannot keep pace with offtake, call sellers must hedge further up the ladder, and dealers must fund near-dated delivery by trimming comfort further out the curve. That dynamic is how markets grind toward headline numbers in orderly steps rather than leaps.
You don’t have to guess whether China is bid. During Shanghai hours you can track live premiums vs. LBMA for silver, gold and platinum on inproved.com/lbma-vs-sge. It’s a simple way to separate narrative from tape: if the premium is there and the forward curve stays negative while vaults rebuild from a low base, you are still in a world that pays for immediacy.
China restocked silver at the fastest clip in 17 months—+129 tons to 688 tons after +95 and +68 ton weeks—while printing new price records and lifting open interest. The SHFE forward curve sank deeper into backwardation (Apr’26–Feb’26 at –¥49/kg, Jun’26–Feb’26 at –¥77/kg), and the China–LBMA basis stayed positive even on down-hours. In the West, PSLV took in more metal (units to 599.5 million after a 6.2% two-session jump), SLV pushed into its $50 call wall with buoyant call demand, and COMEX inventories hovered at an 8½-month low while the Dec’25 line traded below spot. The curves and vaults are all telling the same story in different accents: the market values the next ounce more than the later ounce, and it is behaving—politely but firmly—like a market with narrow doors.
Tightness ends when levels rebuild enough to flatten the curve and erase the basis—not when a single session prints red in New York. Until that shows up in the ledgers, the simplest reading remains the best one: deliverable beats deferred, and the path between $60 and $70 is less about adjectives than about how quickly the restock can outrun the offtake.
Hugo Pascal’s observation about the AU9999 contract hitting a 10-week volume high underscores the increasing significance of physical gold trading on the Shanghai Gold Exchange. This trend not only highlights robust domestic demand in China but also reflects broader shifts in the global gold market toward physical-backed assets.
Latest articles
Tool and strategies modern teams need to help their companies grow.
Invite users to stay updated with exclusive insights and market trends by subscribing to the newsletter.
Start stacking your bullion. Download the InProved app and build your legacy in gold and silver.
+65 8899 3720
support@inproved.com