Understanding the 2025 Silver Shortage: What Happened and What It Means for South African Investors

A real shortage in London, but not a global crisis

In mid-October 2025, silver prices hit a record high of around $53 per ounce (roughly R960/oz at current exchange rates), and headlines screamed about shortages. But before you rush to your local dealer or panic about your investments, here's what actually happened, and what it means for South Africans thinking about silver.

What Really Happened?

Think of it like this: imagine there's plenty of mielie meal in the country, but all the shops in Johannesburg ran out at the same time. That's essentially what happened with silver in London.

The key facts:

• Silver prices peaked at about $53–$53.50 per ounce on October 14, 2025

• The shortage was concentrated in London's physical market, not worldwide

• Traders literally air-freighted silver bars from New York to London to meet demand

• London prices ran $1–$2 higher than New York prices, unusual and a clear sign of stress

  
  

Why Did This Happen?

Several factors converged at once:

Strong demand from multiple sources:

• Indian buyers stockpiled silver for Diwali festivals and weddings (remember, India is a major player in precious metals markets)

• Industrial users, especially solar panel manufacturers, needed more supply

• International investors piled in as prices rose

  
  

Supply challenges:

• Most silver was sitting in New York warehouses, not London

• Moving metal quickly across the Atlantic is expensive and slow

• Mine production hasn't kept up with demand for several years

  
  

The technical squeeze:

• London's lease rates (the cost to borrow silver) jumped to 11%, a sign that deliverable bars were scarce

• Banks and traders scrambled to find physical metal to meet their obligations

  
  

Is the World Running Out of Silver?

No. This was a logistics and location problem, not a global depletion.

Silver is abundant worldwide, but it was in the wrong place at the wrong time. Moving tons of metal internationally takes days or weeks and costs real money. The October spike reflected that friction, not the earth running out of silver.

That said, there's a structural issue: the silver market has run annual deficits (more demand than new supply) for four consecutive years through 2024, with another deficit expected in 2025. This makes temporary squeezes more likely.

What's Happening Now?

The immediate crisis has eased:

• Metal has flown in from the US and China to London

• Indian demand cooled after the festival season ended by late October

• Premiums and prices have started to normalize

However, the situation remains volatile. If logistics tighten again or another surge in demand hits, prices could spike once more.

Should South African Investors Buy Silver Now?

The short answer: Maybe, but only with a disciplined plan, never as a lump sum at these elevated levels.

What makes sense for SA investors:

• Small, recurring rand purchases over weeks or months (called dollar-cost averaging) to smooth out timing risk and rand volatility

• Wait for pullbacks of 8–12% from recent highs before adding larger amounts

• Consider the rand angle: Silver is dollar-priced, so you're also making a call on ZAR weakness/strength

• Watch the warning signs: If London prices run more than $1 above New York again, or if lease rates spike back above 15%, pause new purchases

  
  

What to avoid:

• Betting your savings on a one-way move to $100/oz (around R1,800/oz)

• Buying retail Krugerrands or coins at premiums above 6% over spot price from local dealers

• Using leverage or borrowed money, especially risky given rand volatility

  
  

How to Buy Silver in South Africa

Your options:

1. Physical silver: Buy bars or coins from reputable SA dealers like SA Bullion or SA Gold Markets. Compare their prices to international spot plus a reasonable premium (under 6% for bars)

2. JSE-listed ETFs: Look for silver ETFs on the JSE with low fees (under 0.6% per year)

3. Offshore ETFs: Through your broker, access UK or US silver ETFs if you want dollar exposure (remember your offshore allowance limits)

   
   

Cost considerations:

• Factor in VAT (15%) on physical silver in SA, a significant cost

• Compare dealer buyback terms before you buy

• Account for storage costs if buying physical

• Watch the rand/dollar rate, it can amplify or reduce your returns

  
  

Key Indicators to Monitor

If you're considering silver, keep an eye on:

1. London–COMEX basis (the price difference between London spot and New York futures): Below $0.50/oz is normal; above $1 signals renewed tightness

2. Lease rates: Falling rates below 10% suggest normalizing conditions; rising rates above 15% mean stress

3. Indian premiums: Falling premiums indicate fading demand pressure; sustained premiums above 5% suggest ongoing tightness

4. The rand/dollar exchange rate: A strengthening rand will eat into your dollar-based silver gains; a weakening rand amplifies them

   
   

A Simple Plan for South African Buyers

If you decide silver fits your portfolio (typically 4–8% of your investments):

Core strategy:

• Allocate, say, R36,000 over 10 weeks = R3,600 per week

• Buy every week regardless of price movements

• Use the lowest-cost vehicle available to you (compare JSE ETFs vs physical costs including VAT)

  
  

Tactical adds:

• Keep another R24,000 aside

• Add half (R12,000) when silver pulls back 10% AND the London-New York price gap normalizes

• Add the other half on a further 6–8% pullback

  
  

Stop buying if:

• You hit your allocation limit (say 8% of portfolio)

• The London squeeze returns (basis >$1/oz)

• The rand suddenly strengthens dramatically, reducing your dollar exposure appeal

  
  

The Bottom Line for South Africans

The October 2025 silver "shortage" was real but localized—a squeeze in London caused by logistics, stockpiling, and strong demand, not a global running-out of silver. Prices remain elevated and volatile.

For South African investors, silver offers both precious metal exposure and implicit dollar exposure, potentially useful given rand volatility and local economic uncertainty. However, this isn't a "buy everything now" moment.

The structural deficit story remains intact, but short-term squeezes tend to unwind once metal relocates and hot money cools. If silver fits your investment goals, consider small, regular purchases in rands and keep powder dry for pullbacks.

Remember: You're taking on both silver price risk AND currency risk. Don't invest more than you can afford to lose, factor in SA's higher costs (VAT, spreads), and consider speaking to a qualified financial advisor before making any decisions.

This article is for informational purposes only and not financial advice. Commodity markets are volatile, and currency fluctuations add additional risk for South African investors. Always do your own research and consider professional advice.