SILVER: THE BEST TIME TO OWN IT, WORST TIME TO TRADE IT

Added: 2026-05-13

[00:00:00]day is the 12th of May, 2026. And the topic of today's video is going to be silver again.

[00:00:08]And why I believe this is the best time to own it, sure.

[00:00:12]But on the other side, it might be the worst time to trade it.

[00:00:17]Before we begin, don't forget to like the video, subscribe to the channel, and turn on the notifications if you don't want to miss any of my future updates.

[00:00:28]What a great Monday was for silver investors, with the metal trading as high as $87, up more than 7% on the day.

[00:00:37]While the rest of the market, from gold to bonds to stocks, was probably flat.

[00:00:45]While I'm feeling pretty happy about the nominal gains in my portfolio, I will still be cautious for a little longer before resuming my stacking.

[00:00:54]And here are my reasons.

[00:00:57]First of all, silver is currently trading in contango, not in backwardation, as you can see in this chart.

[00:01:04]This is a signal that at this stage, unlike what we observed from October 2025 to March 2026, the market is not perceiving any scarcity of physical metal right now.

[00:01:18]While the gap between supply and demand for silver still persist, the reason of physical scarcity problem has been tamed. It's mostly thanks to the actions taken by the Shanghai Futures Exchange to protect Chinese industrial buyers.

[00:01:38]Zero delivery allocation for non-hedgers.

[00:01:42]Starting at the end of February 2026, the Shanghai Futures Exchange announced that participants without approved hedging quotas will receive zero delivery allocations on certain silver contracts.

[00:01:56]Two, targeting near-term contracts.

[00:01:59]The restrictions specifically target near-term silver futures, requiring hedging positions in the delivery months and the month before to be approved.

[00:02:09]Otherwise, they were set to zero contracts.

[00:02:14]Three, focus on industrial users.

[00:02:18]The policy was designed to restrict physical silver access to genuine industrial hedgers, preventing speculators from taking physical delivery during a period of supply scarcity.

[00:02:30]And lastly, automatic conversion of positions.

[00:02:33]For all silver futures contracts, starting from the last trading day of February 2026, non-futures company members and overseas special non-broker participants without specialized approvals at their general month hedging transactions limits for the near delivery months automatically converted to zero contracts.

[00:02:57]These measures, combined with broader Chinese government export licensing requirements for silver starting in January 1st, 2026, fundamentally shifted the market, prioritizing local manufacturing needs such as solar panels and electronics over speculative physical demand.

[00:03:17]Not surprisingly, as you can see the second chart, the Shanghai Futures Exchange silver vaults started to record a steady increase in physical silver after almost being completely depleted in February.

[00:03:33]But let me be clear.

[00:03:34]While this is bad news in the short term, the truth is that this move by China made the silver market stronger and more resilient in the long term, effectively creating a futures market that is more and more backed by the real metal and not by empty and empty promises like the comics or the LPMA.

[00:03:56]The second reason I prefer to remain cautious on silver for the time being is the Damocles sword of the straight-over moves still hanging above the head of all financial markets.

[00:04:09]On Sunday, Iran shared its answers to the US peace proposal, and not surprisingly, its demands were promptly rejected by President Trump.

[00:04:22]While this outcome was obvious to me from the beginning, and I never changed my mind about it, traders and investors moved on a while ago from factoring in any disruption risk to economies and markets resulting from the worsening mess in the Middle East.

[00:04:40]Surely, one thing that has been very effective so far in reassuring everyone is the successful oil price manipulation campaign implemented by the US government in coordination with its allies.

[00:04:54]Here is the problem, though.

[00:04:56]As you can see in this chart that compares the oil price with the trend of US SPR releases from 2022 till today, this price manipulation campaign is just buying time.

[00:05:11]Why?

[00:05:12]If you step back and compare the playbook, the cynicism becomes even clearer.

[00:05:18]In 2022, Biden dumped the Strategic Petroleum Reserve into the market in the absence of a true supply shock, explicitly to push prices down and buy relief from an inflation crisis.

[00:05:35]But, in 2026, Trump is doing something far more desperate, leasing the SPR into the market even as the biggest oil supply shock in history begins to unfold.

[00:05:51]Not to solve the problem, but to mask it for as long as possible.

[00:05:58]As a matter of fact, the true oil supply shock hasn't occurred yet.

[00:06:03]Considering that Trump is now only left with deciding between trying to keep the naval blockade on Iran in place in the hope that it choke its economy and pushes Iran to fold or resume the military confrontation forcing Iran to agree to the US peace deal requests.

[00:06:25]If successful, of course.

[00:06:28]There is currently no scenario left in which Strait of Hormuz swiftly and fully reopens for transit as it was the case till the 27th of February.

[00:06:43]Period.

[00:06:44]As a result, there will be another burst of volatility in financial markets sooner or later.

[00:06:50]Either caused by the strain put on global oil reserves heading closer and closer to tanks' bottom if global demand does not adjust accordingly by then or by resumption of the military conflict where the US is not assured to be a certain winner at all.

[00:07:11]Such a spiking volatility starting from the oil market and then cascading onto stocks, bonds, and precious metals will surely impact silver. And that impact is likely going to be on the downside because the global liquidity problems I have been perhaps the first to warn about till now and are worsening.

[00:07:34]This was confirmed by the latest statement of Indian Prime Minister Modi.

[00:07:40]We invited Indian citizens to stop buying physical gold for a year in order to ease the pressure on India's central bank reserves and the Indian rupee.

[00:07:53]On the bright side though, with demand for solar panels, electric vehicles, and high-performing battery storages, all items that require physical silver, increasing in a push to diversify away from crude oil dependence in the future, the long-term tailwinds behind silver remains strong.

[00:08:13]Silver has delivered a powerful reminder of its upside when sentiment flips and price moves quick.

[00:08:20]But the very factors that can drive outside rallies also argue for patience when positioning after a sharp run.

[00:08:29]Right now, the market is not signaling an acute physical squeeze. At the same time, the macro backdrop remains fragile.

[00:08:38]The straight-over moves risk has not been resolved. It has been merely underpriced by markets that have grown complacent.

[00:08:47]Any renewed disruptions or escalation could force a new volatility regime across energy, equities, credit, and metals.

[00:08:58]In that scenario, silver's sensitivity to liquidity and risk appetite matters.

[00:09:03]Even if, in the long term, the thesis stays intact, the short-term path can include sharp drawdowns as investors de-risk and dollar funding tightens.

[00:09:15]That is why, for now, the prudent stance is to avoid confusing a strong day with a durable new trend.

[00:09:23]Thanks a lot for listening to my podcast again today, for supporting me on X, on Instagram, and for reading my research on justin zito.com. I wish everyone a nice day.

[00:09:47]>> Mhm.