Why China's Silver Squeeze Hasn't Worked Yet

We made a few silver recommendations in April of last year. Those two positions are up 125% and 187%, but…

I think the bigger move is still in front of us.

Silver changed hands near $69 this morning, 43% below the record it set in January, and down about 3% on the year.

Over those same seven months, the country that refines most of the world's silver put its exports behind a licensing regime, the chemical that liberates most of the world's new supply got cut off, and the market walked into its sixth consecutive annual deficit.

The supply picture fell apart all year. The price went down anyway.

Silver's Worst Day Since 1980

On January 29 silver hit an all-time high above $121 an ounce, finally clearing the 1980 record that had stood for 45 years.

Within thirty hours it had fallen more than 30%, after the Warsh appointment eased fears about Federal Reserve independence.

Since then, the market has been grinding back.

While the market watched the Fed, Beijing was rewriting the supply side.

And three important things have happened since:

January 1. China put refined silver exports behind a licensing regime.

To qualify for a license, a refiner needs 80 tonnes of annual production capacity. Forty-four firms cleared that bar, all of them large and state-aligned. Hundreds of smaller exporters did not.

In a single stroke, exporting Chinese silver became something a few dozen approved companies do at the state's discretion.

March. Chinese silver imports hit about 836 tonnes in a single month, nearly three times the ten-year March average of 306 tonnes.

April 10. Beijing signaled it would halt sulfuric acid exports beginning in May.

And it’s the acid story that reaches all the way back to the mines. Here’s why.

Most Silver is Not Mined On Purpose

Around 70% of newly mined silver never comes out of a silver mine. It arrives as a byproduct of copper, lead and zinc production, according to the Silver Institute's World Silver Survey. Silver is along for the ride.

Sulfuric acid is what makes a large share of that copper production work. Miners pour it over crushed ore to dissolve the copper out.

Restrict the acid and producers face higher costs or lower output, and the silver that would have come up with that copper simply never appears.

China controls 40% of the global sulfuric acid market, and Chile is where it bites first.

The country produced 5.3 million tonnes of copper last year against global output of 23 million, and it imports more than a million tonnes of sulfuric acid a year to do it.

China supplied 37% of those imports in 2025, and close to a fifth of Chilean copper output depends on acid-based leaching.

That puts something near 5% of the world's copper, along with the silver that comes up with it, downstream of a chemical Beijing has moved to stop exporting.

The timing makes it worse.

Sulfur is the feedstock for sulfuric acid, and the closure of the Strait of Hormuz has taken out a third of global sulfur production and half of seaborne sulfur trade.

The one flexible valve left in that system was Chinese acid exports, and Beijing moved to shut it.

China Refines 70% Of The Bars That Settle Trades

The wholesale silver market does not trade in generic metal.

It settles in bars meeting the London Good Delivery standard, which specifies purity, weight and, critically, that the bar came from an accredited refiner.

A bar that fails that standard cannot be delivered into the market that sets the price until an accredited refiner melts it down and casts it again.

The metal is real either way.

China is estimated to control around 70% of the world's silver bullion meeting that standard.

So the January licensing regime is a lever on the one form of silver the global market can actually settle in.

Shanghai Pays More, and The Metal Moves East

Through this year, Shanghai has quoted silver at a premium to the Western price. Metal flows toward the higher bid, the way it always has.

Paying a few dollars more per ounce at the front end is an inexpensive way to end up holding a great deal more of it at the back end.

Six straight years of deficit, 800 million ounces gone

Silver demand is forecast to exceed supply for the sixth consecutive year in 2026. The cumulative deficit over the past five years has passed 800 million ounces, a full year of global mine output already consumed.

Silver is the most electrically conductive element there is.

That property is why it sits inside solar panels, electric vehicles, data center power electronics, satellites and guidance systems.

Every one of those categories is growing, and none of them have a cheap substitute for the conductor.

A market this tight did not need a supply shock on top of it.

None Of This is In The Price

Silver's high came on January 29. The break came the next day.

Every supply development described above either began that same month or came after it.

The market repriced silver for a decision about the Federal Reserve.

It has not repriced silver for an acid embargo that reaches into the world's largest copper mines, or for a licensing regime sitting on top of the bullion the wholesale market settles in.

Those are two different things, and only one of them has shown up.

The Gold-to-Silver Ratio is 67 to 1

Gold trades near $4,650. Silver sits at $69. That puts the gold-to-silver ratio at 67 to 1.

At 67, the ratio is not screaming cheap. It sits close to the 25-year average near 68, inside the band between 50 and 85 where it has spent about 70% of modern history.

Every precious metals bull market of the last fifty years has ended with the ratio down at its floor. In January 1980, at the top of the last great monetary run, it bottomed near 17 to 1.

In May 2011, with silver approaching $48, it reached 31 to 1. Days before silver's all-time high this January, it touched 43 to 1.

Three tops, half a century apart, and not one of them happened with the ratio at its average.

The recent history is sharper still. On April 7, 2025, the ratio touched nearly 108 to 1, one of the most stretched readings ever recorded outside the March 2020 panic that took it to about 125 to 1.

Nine months later it was at 43. Silver went from under $30 to above $121 in that window.

The ratio spent five years telling anyone who would listen that silver was cheap. Then it corrected the whole thing in nine months, and the people waiting for a comfortable entry never got one.

So run the math yourself.

If gold does absolutely nothing from here and the ratio returns to 50 to 1, silver is $93. Back to the 43 where it stood in January, silver is $108. At 40 to 1, silver is $116.

And if this bull finishes the way 1980 and 2011 finished, with the ratio back at its floor, the numbers get considerably larger than anything I am willing to print.

I will wear this call either way.

Silver takes out its January 2026 record above $121 an ounce and prints a new all-time high before the end of 2027.

For context, BlackRock and JP Morgan currently see silver surpassing $80 by the end of this year and reaching $100 by 2030.

I think the 2030 number will read as conservative when we get there, and the supply picture above is part of the reason why.

I could be early. I have been early before. Being early feels identical to being wrong right up until the moment it doesn't.

Sixteen Months, Two Positions

I said at the top that we have held silver since April of last year. Sixteen months is a long time to sit on a position that has more than doubled, and most people would have rung the register somewhere along the way.

And while we sold some during our Moonshot Ride, we’re still holding onto half the position with a zero cost basis and some nice gains on top.

We still hold both because the case for silver is stronger today than it was on the day we bought.

Everything laid out above happened after we took those positions. We bought on the deficit and the debasement. Then the supply chain came apart in front of us at no extra charge.

What Would Prove Me Wrong

Three things, and I am watching all of them.

1. Chile could line up replacement acid supply faster than anyone expects, from Morocco, the Gulf, or new domestic smelter capacity.

2. Export controls are bargaining chips, and Beijing could loosen the licensing regime as part of a broader trade negotiation.

3. And the deficit could close from the demand side instead of the price side, with scrap coming out of drawers at $70 silver while engineers quietly design silver out of products where thrifting is possible.

Any of the three would take the pressure off, and I would tell you so in this letter. None of them have happened yet.

Everything Above is Yours

If you’re a free reader, you just got the whole diagnosis, free.

The licensing regime, the acid, the Chilean chokepoint, the Good Delivery lever, the ratio history and the price target I am willing to be judged on.

Take it and go buy physical metal at any dealer in the country if you want to. You don't need me for that, and I would rather you own silver through someone else than not own it at all.

What you don't have is the name.

Premium Members get the research on the two producers that came through our screen and are being watched right now.

The Moonshot Minute portfolio currently holds 28 open positions. 23 of them are profitable. Six are up more than 100%, led by one at 247%. The average open position is up almost 55%.

In precious metals alone, five positions opened between April 2025 and this spring.

Every single one is a winner. 

The average gain across them is about 113%, and we have not closed one of them.

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Either way, you now understand what is happening underneath the silver price better than almost anyone reading the mainstream financial press.

Double D

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