I recently saw a set of data that was quite shocking. The silver inventory at the Shanghai Futures Exchange has hit a nearly ten-year low, now only 318.5 tons, a level not seen since October 2015. Even more astonishing is that in just a few months this year, silver stocks have evaporated by 54%, with more than half of the reserves taken out in a short period.

What does this imply? As the world's largest consumer of precious metals, China’s demand for physical silver is truly insatiable. Once the exchange’s silver inventory drops to such a dangerous level, supply-side issues begin to emerge. There isn’t enough metal available for delivery, and at this point, the market becomes prone to short squeezes, causing prices to naturally soar.

Currently, China is stockpiling silver regardless of the price, depleting the SHFE’s inventory. So, what’s next? Will the silver inventories on COMEX and in London also face the same pressure? From the sharp decline in silver stocks, it’s clear that this physical metal battle has just begun.