10/12/2025
We are operating in unprecitented times. Gold and silver prices are at all-time highs, and new investor demand across all categories has strengthened in recent weeks, while strong liquidations continue from other investors. These markets bring opportunity, but they also create new challenges that we want to communicate clearly and proactively. I want to take a moment to explain what’s happening, what it means for you, and how we’re managing through it.
Silver is in Deep Backwardation
Silver has moved into deep backwardation, meaning the spot price (XAG/USD) for immediate delivery is now trading significantly higher than front-month futures prices (SI) for later delivery.
Under normal conditions, the opposite is true — that’s called contango, when futures prices are higher than spot because of the cost of carry (storage, financing, and insurance). In backwardation, the market inverts because participants are paying a premium for metal today rather than later. Backwardation creates an increased carrying cost for market participants holding physical inventory and a short hedge position.
It’s important to understand that the U.S. retail bullion investor supply or demand doesn’t meaningfully impact this price dislocation. The main drivers are industrial users, institutional participants, and global wholesale buyers — entities that need large quantities of physical silver for immediate delivery into production, manufacturing, or exchange-deliverable settlement.
This demand dynamic is very different from the behavior of the U.S. investor buying bullion coins or bars. It’s this large-scale, logistics-intensive demand that is currently pulling metal out of the system and driving the deep backwardation we’re seeing.
Why This Is Happening
This isn’t a shortage of silver — it’s a mismatch of form and location.
Refinery Capacity:
North American refineries are operating at full capacity, and many other refineries around the globe are now approaching their throughput limits. This means it takes significantly longer for secondary and recycled silver to be refined into exchange-deliverable form — the specific formats required for settlement (such as LBMA or COMEX-approved bars).
Deliverable vs. Exchange-Deliverable:
There is plenty of “deliverable” silver in the broader sense — coins, bars, industrial scrap, doré, and other forms — but not enough exchange-deliverable silver ready to meet immediate delivery obligations. The bottleneck lies in converting this metal into the proper form to ultimately convert that silver to cash, which ties up capital, extends cycle times, and adds financing costs throughout the system.
Wider Spreads and Higher Carry Costs:
These inefficiencies are causing significantly wider spreads in spot prices and product premiums across regions and product categories. Retail sellers & dealers should expect this environment of wider spreads to persist — it’s a direct reflection of global market disruption and may continue until refining and logistics constraints ease. Spreads and liquidity will be volatile over the coming weeks and months until the supply chain normalizes and markets find equilibrium.
PGMs:
PGMs (Platinum Group Metals) have also been in backwardation, though not currently as severe as silver’s. This can change at any time.
Gold:
Gold is not currently showing the same signs of backwardation, but market dynamics can change rapidly. The same supply chain constraints and financing costs could begin to affect gold arational
Expectations from Conditions Ahead:
Markets have and will continue to change rapidly. Beyond just price volatility, terms, conditions, and availability can also shift quickly as liquidity tightens and costs fluctuate.
It’s realistic to expect that things may get worse before they get better. The market will normalize at some point — but there is no clear timeframe for when that will occur. We appreciate your understanding as we navigate this unique market, and we will strive to return to a normalized, efficient system as soon as market forces allow.
These are extraordinary times — full of both challenge and opportunity. We want to thank every one of our customers for your partnership, communication, and patience as we all work through the current market dynamics. Our commitment to you is unwavering: to remain transparent, dependable, and proactive as we continue to operate in one of the most dynamic precious metals markets in modern times.
(A message from one of our wholesalers shared so you have a better understanding of market conditions).
