Insights from Peter Krauth on physical shortages, supply inelasticity, and the anatomy of a historic silver rally
Silver has always been the most volatile—and arguably the most misunderstood—precious metal. But in 2025, silver has shattered expectations. With prices surging more than 140% in a single year and breaking decisively above $70 per ounce, the market is sending a message that goes far beyond speculative enthusiasm.
In a wide-ranging interview with Triangle Investor, Peter Krauth—author of The Great Silver Bull and editor of Silver Stock Investor—laid out why this rally is not just another short-lived spike, but the result of years of structural imbalances finally colliding with investor psychology.
What makes this silver bull market truly exceptional is not just the price action, but the underlying mechanics driving it.
According to Krauth, the explosive move in silver is not attributable to a single factor. Instead, it reflects a rare convergence of forces: physical tightness, inventory depletion, shifting investor sentiment, geopolitical uncertainty, and monetary instability.
For years, silver prices appeared capped in the $20–$30 range. Krauth explains that this ceiling was largely the result of large above-ground inventories sitting at major futures exchanges such as COMEX, LBMA, and Shanghai. These inventories allowed industrial users to take delivery without forcing miners to increase production or pry metal out of private holdings through higher prices.
That illusion of abundance has now collapsed.
Between 2021 and early 2024, exchange inventories declined steadily. Krauth warned early that, at the pace metal was being withdrawn, the system had a limited lifespan. Once those buffers disappeared, price had no choice but to respond.
One of the clearest signs that this bull market is grounded in reality—not hype—is the growing difficulty of making physical deliveries, particularly in London, where most ETF silver is stored. Even conservative, mainstream sources have acknowledged mounting delivery stress.
At the same time, silver inventories in China have dropped to 10-year or possibly all-time lows, suggesting that global supply chains are being stretched thin. Silver has been moving across regions, but Krauth cautions that this reshuffling does not solve the core problem.
As he puts it, “No matter how much you move the silver around, it doesn’t mean you have more silver. You’re just changing the location.”
This “shell game,” as Krauth describes it, only highlights how little excess metal actually exists in the system.
Krauth draws a sharp distinction between today’s market and the 2021 “silver squeeze,” which he correctly identified at the time as sentiment-driven and temporary. That episode lacked fundamental support.
Today is different.
Since 2021, silver has been in persistent structural deficits, meaning demand has exceeded supply year after year. 2025 marks the fourth consecutive deficit, and projections from the Silver Institute suggest even larger shortfalls ahead.
This imbalance is not being driven by runaway demand alone—it is being reinforced by a supply side that simply cannot respond quickly.
In most commodities, higher prices eventually bring new supply to market. Silver defies that logic.
Only about 25% of global silver production comes from primary silver mines. The remaining 75% is produced as a byproduct of mining other metals such as copper, gold, lead, and zinc. These miners are focused on their primary metals, not silver, and have little incentive to materially increase silver output.
In fact, Krauth highlights a counterintuitive dynamic: “A higher silver price does not necessarily mean more silver comes to market—in some cases, it can actually mean less.”
When prices rise sharply, some miners choose to process lower-grade ore, maintaining profitability while producing fewer ounces. This makes silver supply what Krauth calls inelastic to price, a rare and powerful condition in commodity markets.
Despite his long-term bullish stance, Krauth is candid about near-term risks. At $70, silver has reached a psychologically important level, and speculative positioning in futures markets is elevated.
Corrections, he emphasizes, are normal—and necessary.
However, corrections do not always mean dramatic crashes. Silver could just as easily consolidate sideways, allowing time to absorb gains. Importantly, Krauth believes substantial pent-up demand remains on the sidelines, waiting for pullbacks rather than chasing highs.
Silver has long been accused of being manipulated through futures markets. Krauth does not deny the possibility of short-term suppression, but he rejects the idea that manipulation can override fundamentals indefinitely.
History supports this view. Silver rose from roughly $4 in 2001 to nearly $50 by 2011. Today, it has surpassed that former all-time high. Combined with visible inventory stress and delivery constraints, this suggests that physical realities are now overwhelming paper mechanisms.
As Krauth notes, price discovery is increasingly shifting toward Asia, where silver is actually consumed—particularly in China and India.
Despite the dramatic headlines, Krauth argues that silver sentiment is still restrained.
True market euphoria, he explains, arrives not when prices rise—but when casual investors suddenly become experts. “Euphoria is when you’re at a cocktail party and someone asks you which silver exploration stocks you own—and that’s not happening yet.”
Most people, he notes, don’t even know the current silver price. Retail participation is only beginning, suggesting this bull market may still be in its earlier stages.
Higher prices are reshaping the mining sector, but not in ways that will quickly fix supply deficits. Krauth sees a surge in mergers and acquisitions, with large producers using higher share prices as currency to buy smaller companies.
Financing conditions have flipped entirely. Deals that once struggled to close are now oversubscribed almost instantly. Yet this activity remains dominated by smart money, not speculative retail flows.
Drawing on episodes like 1980 and 2011, Krauth warns strongly against excessive leverage. Futures markets can amplify gains—but also devastate portfolios when margin requirements are raised without warning.
Instead, he advocates a layered approach to exposure, from physical silver at the low-risk end to explorers at the high-risk end. Importantly, history shows that even large, established silver companies have delivered extraordinary returns, without requiring investors to take extreme risk.
Looking ahead to 2026, Krauth expects the gold-to-silver ratio to continue drifting lower—from roughly 64 today to perhaps 55 or even 50. That would imply further silver outperformance, even if gold continues rising.
Still, after such a powerful year, Krauth believes the market needs time to digest gains before the next major leg higher.
WATCH THE INTERVIEW WITH PETER HERE
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