Gold Demand Trends Q3 2025: The Pause That Refreshes the Bull Market
5. November 2025
The silver market is facing a historic turning point, one that’s reshaping the dynamics of global bullion trade from London to New York.
On paper, silver trades around USD 50 an ounce. In reality, physical premiums have exploded, with coins like the one-ounce Silver Britannia selling in Britain for nearly USD 80 (~GBP 60). Across the world, mints like the Perth Mint have halted production, Indian dealers have defaulted, and major institutions such as the Royal Canadian Mint are listing bars as “out of stock.”
The illusion of abundance has shattered. What we’re witnessing is hardly a paper-market quirk. This is a true physical shortage.
The London Bullion Market Association (LBMA) — the world’s largest hub for physical bullion — is showing severe strain. Lease rates have skyrocketed to 39% annualized, a level unseen in decades, signaling panic and acute scarcity.
Bullion banks, which typically juggle massive paper exposures backed by small pools of physical silver, are being forced into extraordinary measures:
This is not business as usual, it’s financial triage.
In New York, the COMEX — the world’s chief silver futures market — is being drained of inventory. The exchange saw its largest single-day withdrawal of silver in four years on October 10, 2025.
At the same time, a USD 3-per-ounce premium for London spot prices over COMEX futures has triggered a wave of air shipments of silver bars across the Atlantic. But even this transatlantic arbitrage can’t plug the hole.
As Ted Butler noted in the Sound Money Report, LBMA vault holdings fell to 711 million ounces, their lowest level since records began — nearly 400 million ounces below the 2021 peak. That shortfall equals two to three years of global supply deficits.
The situation underscores a harsh truth: the bullion banking model is running on fumes.
According to the In Gold We Trust 2025 report, the silver market will log a fifth consecutive annual deficit in 2025, amounting to 117.6 million ounces, and a cumulative 800 million-ounce shortfall since 2021.
Mine output can’t close the gap. The Silver Institute warns that global production will peak in 2026 before declining, as aging mines reach end-of-life and new projects face decade-long development timelines. Recycling, too, has plateaued near 193 million ounces annually, offering no real relief.
The arithmetic is simple and alarming: demand exceeds supply by nearly a full year of mine output.
The crisis in physical supply coincides with another powerful catalyst: monetary policy.
As Ted Butler explained, Fed Chair Jerome Powell faces a “Prisoner’s Dilemma.” Raising rates risks crushing an over-leveraged U.S. economy, while cutting them risks reigniting inflation. Markets are already betting on 125 basis points of cuts by mid-2026, and history shows that silver thrives in such conditions — rising an average of 332% during past Fed rate-cutting cycles.
If Powell caves to political pressure, the next easing cycle could act as jet fuel for silver. Inflation fears, dollar weakness, and a growing recognition of silver’s scarcity could ignite a broad-based revaluation.
The In Gold We Trust 2025 analysis highlights how industrial usage — not just investor hoarding — is tightening the market:
As silver’s role in clean energy, electrification, and defense deepens, its industrial demand is becoming inelastic, unable to fall even as prices rise.
Another factor adding fuel to the rally is India. In 2024 alone, India imported 225 million ounces of silver, which is roughly equal to the global solar sector’s annual consumption.
The country’s exchange-traded product (ETP) holdings have surged to record levels, with projections suggesting 200+ million ounces by 2027. Even at historically high rupee prices, Indian investors are not selling, reflecting growing financial sophistication and cultural attachment to silver as a store of wealth.
This wave of Eastern demand is draining inventories that Western bullion banks once relied upon for liquidity.
Caught between short futures, shrinking vault stocks, and rising lease rates, bullion banks now face a structural dilemma: either absorb heavy losses to meet physical obligations or risk a credibility crisis that could reshape the very architecture of global bullion trading.
Many are already opting for the former. Basically, they’re quietly covering shorts and repurchasing futures in anticipation of a full-blown supply squeeze.
If the London market — the traditional anchor of global silver liquidity — continues to fracture, the pricing power may shift eastward, toward Shanghai and Mumbai, where physical premiums dictate reality rather than paper benchmarks.
After years of dormancy, silver’s dual identity, as both an industrial powerhouse and a monetary metal, is asserting itself again.
The fundamentals are stark: five years of deficits, record industrial demand, declining mine output, and a central bank cornered by politics. Add to that collapsing inventories and a broken leasing market, and you have the makings of a historic revaluation.
As the In Gold We Trust team wrote, silver is “plucky, volatile, and perpetually undervalued.” However, the metal is also indispensable and in 2025 that distinction may finally command the premium it deserves.
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