On December 2, 2025, the physical precious metals market is taking a breather after a new record for silver yesterday, triggering a fresh wave of allocation from global investors and central banks. Gold spot price is trading at $4,208.77 per ounce, down $22.63 on the day. Silver spot price is trading at $57.58 per ounce, down $0.42 on the day. The gold/silver ratio remains near multi-year lows at 74.0, reflecting intense outperformance in physical silver as structural shortages keep London and Shanghai dealers on edge. Despite a slight pullback in silver, high physical premiums persist, with U.S. Eagles and major bars fetching record over-spot prices. Recent disclosures reveal that both the Reserve Bank of India and the People’s Bank of China are aggressively adding to official gold reserves, intensifying the scramble for deliverable ounces as central bank demand underpins market tightness. Physical demand is being supercharged by the near-universal expectation of a major Federal Reserve rate cut this month, after a flurry of dovish Fed commentary and continued softness in U.S. economic data. The U.S. Dollar Index remains trapped near two-week lows, adding further fuel to the physical buying frenzy as international stackers and jewelers race to secure allocations before year-end.
ING commodity strategists Ewa Manthey and Warren Patterson, reveal that Chinese warehouse inventories of silver at Shanghai Futures Exchange facilities have plummeted to just 531,211 kilograms—the lowest level since 2015 and representing a catastrophic 10-year low that exposes the fragility of global physical supply chains. This inventory collapse follows China’s record-shattering October silver exports of over 660 tonnes, an all-time high driven by desperate shipments to London aimed at easing the extreme squeeze that pushed lease rates above 30% annualized in early October before moderating to current levels near 5-6%. The Shanghai market has moved into backwardation—where near-term prices trade above later-dated contracts—a technical condition signaling acute short-term physical tightness that forces industrial users and fabricators to pay premium prices for immediate delivery or risk production shutdowns. What 95% of precious metals investors are missing is the hidden mechanism behind this: the drawdown reflects not demand destruction but demand acceleration as Chinese merchants, facing new tax regulations on gold transactions implemented in 2025, have pivoted aggressively into silver for wealth preservation and speculation, creating a dual supply shock where both London and Shanghai simultaneously face inventory stress for the first time in modern market history. For physical stackers and industrial buyers, this data point is massively profitable intelligence: with Shanghai inventories at decade lows, Chinese off-exchange “invisible inventory” may be coaxed back to warehouses if backwardation persists, but if U.S. tariffs on silver (added to the critical minerals list in 2024) take effect as threatened, the metal already shipped to America cannot easily return to global markets, potentially triggering a supply crisis that makes October’s 30%+ lease rate spike look modest. Jewelers requiring fabricated silver, solar manufacturers consuming 232 million ounces annually for photovoltaic production, and central banks monitoring de-dollarization trends must recognize that the current $57+ price reflects not speculative excess but structural scarcity—a market repricing where the historical 7-to-1 physical supply ratio of silver-to-gold production remains grotesquely undervalued against the current 74-to-1 price ratio, positioning allocated physical silver as one of 2025’s most asymmetric wealth preservation and profit opportunities before Shanghai inventories stabilize or tariff policies lock metal inside national borders.
