This is actually undermining. It started with silver. I think it's going to follow through into gold. I mean, all the indications are there that it will. Uh it's it's it's beginning to undermine the most important derivative contracts in the whole of the derivative system. Now you may think that this is an exaggeration but bear in mind that the banks and all the rest of it who have these position are counterparty risk the whole way across the entire derivative landscape. So what we're seeing is the


potential failure and certainly if we don't get immediate failure concerns that there will be a failure of derivative counterparties in the whole of that space. Now we're talking about trillions [music] Analysts are increasingly warning about growing instability in the global silver market as tightening physical supplies and declining liquidity put long-standing price structures under pressure. The shift accelerated when China, the world's largest silver refiner, sharply restricted outbound


flows, creating immediate strain across western hubs that were already running on historically low inventories. Market observers note that the usual mechanisms for managing volatility, especially derivatives meant to absorb excess demand, are becoming less effective. More participants are stepping away from paper exposure and demanding direct settlement in physical metal. This change in behavior has exposed an industry heavily dependent on synthetic supply, raising concerns that existing pricing frameworks may not be able to


withstand prolonged stress. Seasoned analysts, including Alistister Mloud, warned that the widening gap between available physical metal and outstanding derivative claims is creating conditions similar to the leadup to past structural breaks. Open interest is falling even as prices rise. A dynamic viewed not as speculation, but as evidence that confidence in paper settlement is eroding. At the same time, key exchanges are struggling to replenish metal inventories fast enough to maintain market trust, fueling fears that the


system is becoming increasingly fragile. These stresses are not isolated incidents. They reflect a broader global shift toward demanding real metal instead of relying on leverage claims. With traditional tools of price containment losing their effectiveness, the silver market may be transitioning toward a more transparent deliverydriven environment. If this realignment continues, the authority of long-standing benchmarks could weaken, paving the way for a repricing that reflects true scarcity rather than


derivative activity. For investors and policymakers, the crucial question is whether the current system can adjust smoothly or whether mounting pressures will trigger a more abrupt reset that reshapes how silver is valued worldwide. Now we present the clips from Alistair's interview. Basically what's happening silver is that all liquidity is gone and [clears throat] uh this um is in large uh part because um the supply of silver has been less than the demand for silver for at least the last four years. Uh the difference


has been made up basically by drawing down on silver stocks of various sorts. the silver institute puts it in its um table if you like as investment silver. Um so that gets drawn down and then they can say that you know at the bottom if you take everything into account we've got um exactly the same figure for supply as we do for demand. But the reality is that um it's in deficit and has been in deficit for the last five or six years. A lot of the uh supply if you like the excess supply hasn't been


investment so much but has been dishoording by uh China. They've been prepared to try and um put a lid on the silver price by ensuring that um manufacturers of you know things that use silver like photovoltaic cells and things um you know do have access uh even though China is the uh largest producer of of photovoltaic cells itself. Um, China has always had um a very firm control over. Well, now what's happened is that silver China first of all has withdrawn from supplying the west. That's the first thing. And the


second thing is that from January the 1st, the export of silver is banned from China. So you can see that this is creating a huge great problem in the markets. Now history of uh the derivative um system. It was originally brought in and sanctioned by uh the US Treasury as a means of um suppressing uh prices of commodities particularly gold and silver particularly gold by diverting demand away from uh bullion into paper bullion if you like bits of paper. And um this sort of fitted in quite well with the regulatory situation


which evolved in the early 1980s whereby um uh uh investments regulated investments were defined as stocks, shares, bonds, so on so forth. But unregulated investments included gold, silver and copper and other commodities. because they were not regulated. It basically means that the compliance officers will limit what an investment manager can do in terms of investing in physical gold, physical silver and and so on and so forth. So um what this meant was that there was a if you like um a control on the price particularly


of gold and also silver and copper and oil and things like that uh by um the expansion of these derivatives soaking up uh demand for them without people actually bothering to get the underlying metal and so consequently the prices of underlying metal didn't rise. What we're seeing in the silver market now however is the complete loss of liquidity that is massive dealing going on in silver derivatives but of course you know rather like a tire hitting the road. [laughter] There comes a point if you like where


people actually want the physical and that is beginning to happen. Consequently, um, in London, there's nothing to deliver even though they've been dealing in huge quantities. And the squeeze on COMX has been, um, evidenced, if you like, by the fact that silver's shooting into new high ground, while at the same time, open interest is declining. What the decline in open interest tells us is that the speculators are not buying it. They're not going for it at all. The price is rising not because of speculation or


investors, if you like, buying it. it is rising because the system itself is close to default. There is also a shortage in uh Shanghai and looking at the combined uh stocks of the Shanghai gold exchange and also the Shanghai futures exchange that's fallen to around about 570 tons which is seen as close to crisis level 600 being you know you don't want to see stocks less than 600 about 570 there's a little bit creeping back in I saw overnight there's about 14 tons came in or was recorded as having


come into the underlying bully in stocks. Um but it's still a very very difficult situation. Now the point about this is that the use of um commodities sorry uh of derivatives to soak up demand for commodities that story is now come to an end and it's beginning to go into reverse. Now just imagine you have got um a large number of bullion banks, hedge funds and all the rest of it who have positions one way or the other in derivatives and these are now questioned as to their value. As that unwinds then


the demand is going to go into the physical. So you can see that as that contract on Comx and also forwards in uh London uh begin to collapse and you know it looks like that we're we're in the early days of that then uh this in itself purely in terms of substitution is going to push up the silver price very very substantially from here. Please subscribe to our channel and activate the bell icon to receive timely updates.