Ganesh Komma breaks down why silver prices are climbing: China's new export rules, five years of supply shortages, physical inventories down 70% on COMEX, and industrial demand eating up half of all silver. He suggests allocating up to 10% of your portfolio to silver.
Questions this video answers
January 1, 2026.
At least 80 tons of annual production and around $30 million in credit lines (state-approved firms only).
Silver prices are exploding due to a severe global supply shortage. The physical market can no longer meet the soaring demand. The situation is like demand is increasing but supply is limited. And here is what is actually going on. I've divided this into five segments. First, China is actually changing the rules. Recently, from January 1, 2026, China has restricted their silver exports. Now to export silver from China, companies will now need government licenses which mean only large state approved firms only qualify for this. At least 80 tons of annual production, also around $30 million in credit lines. Now what will be the impact of it? This effectively blocks small and mid sized exporters. Now China controls roughly around 60 to 70% of their global silver supply. And look at it like this. When China tries to squeeze or tighten their export, global supply drops immediately. And this is the same tact take China used earlier with rare earth metals. We have covered this couple of weeks before in our discussions. Now Second, the silver market is already in a short supply. Silver has been in a structural deficit for continuous straight five years. That means demand is higher than supply every single year. And if you look at 2025, the recent year closing, the global demand was at 1.24 billion ounces for silver whereas the global supply is 1.01 billion ounces. Now if you look at the gap between it, that is actually a gap of 100 to 250 million ounces. And this gap is expected to get even worse after China's export limits. Now mining supply is not growing. Silver mining is mostly a byproduct of copper and zinc. Mining new mines literally takes a very long number of years. It will take approximately 10 plus years to build and over quality is falling. Recycling is not enough to fill the gap. So now if you look at the actual thing happening, there is no quick fix here. Now let's look at the third factor. Physical silver inventories are actually collapsing. This is where it gets even more serious. Now if you look at comics, comics inventories are down by around 70% since the last five years, which means from the year 2020 and if you look at London vaults they are down by 40%. Even Shanghai inventories are at a 10 year low at this current demand. Some regions hold just only 30 or 45 days of usable silver. This is why physical premiums are also exploding. Now if you look at Shanghai, in Shanghai alone, physical silver trades at approximately around somewhere close to 80 plus dollars per ounce. And COMEX prices are even much lower. This price gap means buyers are actually paying extra just to get that real silver. Let's look at the fourth factor, paper silver is completely disconnected from the reality. There is an extreme imbalance between paper silver and the actual real silver. If you go deep, the paper to physical ratio is approximately somewhere around 365 is to 1. And that actually means for every 1 ounce of real silver, there are hundreds of paper clicks. And if you look at the statistics, if you look at the numbers, even if a small percentage of buyers ask for the real delivery, the system breaks. Now markets understand this very clearly and that is one of the prime reason you are seeing the prices are moving in a vertical way, in a exponential way. It is moving. Now let's look at the fifth. The industrial demand is actually keep on rising. Silver is not just a safe haven metal. It is critical for industries like solar panel manufacturing, electrical vehicles, electronics and even in medical devices industry. Also it has a lot of usage and industrial use now makes up to 50 to 60% of total silver demand. And actually looking at the facts, there is no real substitute for silver. In many of these use cases, banks and institutions are reacting to it. The supply limits, the physical shortages or even paper market risk is already factored in. Now silver is not rallying just because of fear. It is rallying because a real supply squeeze is playing out in the real time. Now looking at what should be my thought process for silver, if you are purely on the trading part of it, if you are purely a trader, maybe you may have a short term volatility or short term gaps. But that should not move you away from this metal. Follow your exit rules. Maybe on trading view you can look on a daily timeframe, anything below your EMA 21 or EMA 50. You should be more cautious if you're a long term investor. Silver is a part of my asset diversification. For many years people have forgot about asset diversification. And commodities have actually proven that asset diversification is very very important. If silver is a part of your asset diversification, up to 10% of your asset allocation or up to 10% of your portfolio, you can be there in silver. And if you have a long term horizon, track it on a weekly time frame. Simply follow your EMA 30 and as long as silver is trading above your EMA 30 and if you have a long term horiz, keep it as a part of your asset diversification. Now I want you to let me know in the comments what are your key takeaways out of this discussion and what is your thought process of silver and how do you see silver as a long term asset class? Do let me know in the comments.
