Tug of War between East v/s West – Physical Demand v/s Paper Leverage
Silver spot prices showed a notable divergence last Friday (December 26, 2025) between Eastern and Western markets, with Shanghai physical trading near $80/oz while COMEX hovered around $72/oz, creating a $6-8 premium driven by physical demand in Asia. This gap aligns with reports of Eastern markets demanding immediate physical delivery amid low inventories, contrasting Western paper trading on COMEX and LBMA. Prices converged somewhat as Western markets reacted, with silver settling higher around $77-79/oz by December 26 amid a broader 10%+ surge from recent lows.
Price Discrepancy Details
Shanghai's spot price hit nearly $80/oz during thin holiday liquidity ("Ghost Week"), reflecting genuine industrial and physical buying from East Asia, while COMEX/LBMA prices lagged at $71-72/oz due to paper contracts and suppressed liquidity. The spread exceeded historical norms of $2, as arbitrage failed amid COMEX registered inventory drops (down 73% since 2020) and China's impending 2026 export restrictions. Indian silver rates jumped accordingly, from $2,090/10g on Dec 19 to $2,400/10g by Dec 26, signalling global repricing.
East-West Market Dynamics
Eastern demand—led by Shanghai—prioritizes physical metal for solar, EVs, and stockpiling, outpacing Western speculative paper trading on COMEX, where leverage dominates. COMEX saw heavy delivery demands (47.6M oz in days, 60% of available stock), draining vaults and forcing higher prices as physical reality overrides paper suppression. China's policy shift to retain refined silver exacerbates this, positioning East with structural advantage in a 200M+ oz annual deficit.
Recent Surge Context
Silver rose 4.3% to $77.92/oz on Dec 26, up 45.86% monthly and 165% yearly, fuelled by the gap closure and industrial demand (680M oz in 2024). On Dec 19 (prior Friday), COMEX closed near $66/oz, but the holiday divergence accelerated the rally to near $79/oz. This tug-of-war favors East's "genuine" physical pull over West's futures manipulation claims
Now it is time to concentrate on price movements in Gold:
Silver just jumped 10% yesterday and touched a new high of $79/oz. Many believe this is the end of the cycle for precious metals. No, it is not end of the cycle, this is an early/mid-cycle phase of the precious metals bull, with a plausible path to much higher silver if gold extends toward the 4,500–5,000 band and the gold:silver ratio (GSR) continues to compress.
Where is gold in the cycle?
Gold is trading in the mid?4,000s per ounce and has already risen around 70% year-on-year into late December 2025, which is a classic impulsive leg, not yet a parabolic exhaustion blow-off. Forward projections from various forecasters show scenarios with gold oscillating around or above 4,500 through 2026, consistent with 5,000/oz upside anchor in a recessionary or renewed easing backdrop.
Reading the gold:silver ratio:
The GSR has fallen from triple digit levels above 100 in early 2025 to the 60s–70s region as silver has outperformed, yet it still sits above or around the long?term average near 60–70, not at the compression lows seen at prior secular tops. Historically, major silver peaks (1980, 2011) came with the GSR compressing toward the mid-teens to low-30s, so a move from ~60 today toward, say, 30 alongside 4,500–5,000 gold still leaves ample room for silver to outperform late cycle.
Implied silver targets from this framework:
If gold trades at 5,000 and the GSR merely revisits 60, silver implies ~83/oz, at 5,000 with GSR 50, silver implies 100/oz, and at 5,000 with GSR 40, ~125/oz, which are entirely consistent with historical compression behaviour at mature bull phases. Spot silver has already printed new all time highs near $ 79/oz in December 2025, so the market has accepted a new price regime; projecting from this breakout, 80–100/oz sits within common Fibonacci and measured move extensions from the 2011–2020 base.
Inter market ratios backing “just the beginning”:
Silver has broken higher not only in nominal USD terms but also versus the S&P 500, USD (DXY), oil, and M2, which had previously capped it for over a decade; these ratio breakouts typically mark regime shifts where capital rotates from financial assets and fiat claims into real monetary collateral. The fall in the S&P 500-to-silver and M2-to-silver ratios from extreme highs, combined with structural monetary and geopolitical stress, supports the view that silver is transitioning from under owned “anti bubble” status into the leadership phase of the precious metals cycle rather than topping now.
How to “shift focus” from here:
Use gold as the anchor and GSR as the timing tool: as long as gold holds its structural breakout and the GSR trends down but remains above prior secular top zones, silver’s risk-reward stays asymmetric on the upside.
Track inter-market ratio Behavior (S&P/silver, DXY/silver, oil/silver, M2/silver):
Continued breakdowns in these ratios would confirm the thesis that the 2025 move is the first major leg of a multi-year re-rating of silver, not the end of the bull.
If volatility creeps soon due to precious metals getting into uncharted territories, those will be Buy on Dip opportunities.
Disclaimer:
These are views of the author and for information purposes only. This should not be construed as investment advice