China continues to buy up physical silver, putting pressure on paper contracts issued by exchanges in the West

It has been just over a month since I wrote about the precious metals bull market, which has been quietly moving up over the last few years with no fanfare from any of the mainstream news outlets.

To be exact, I said the fundamentals of the silver market on December 21, 2025, showed evidence that the Shanghai Metals Exchange (SME) had been taking control of the physical price. 

The price of silver on that day was $67 USD per ounce and gold was at around $4,340. 

On Thursday this week, prices have topped at $117 and $5,426 respectively – unprecedented moves upwards even against the backdrop of the last two years, when both metals having broken records on a weekly basis.

In the days since there has been a pull-back, particularly on silver, which many analysts predicted. Many of them now predict that both silver and gold still have much further to run, and so we expect another steady climb to take place over the coming 12 months and beyond.

Mixed messages: buy or sell?

Looking as I do every day for information that may better inform my investment strategy, I can attest to the difficulty of sifting through the raft of opinions and reports on market fundamentals. 

There are experts, equally qualified and experienced, who are diametrically opposed in their opinions: listen to one and you would take the profits; listen to another and you would buy more.

It is therefore vitally important to be able to discern and evaluate what actual factors are driving this blow off top, taking into account that both metals are in “blue skies” at the moment, so looking at previous performance may not be of much use.

A common factor

There is good reason to believe we are living in the time of a major shift or reset. Here’s saying I’ve heard repeated by the financial veterans I have listened to over the years: “History doesn’t repeat, but it very often rhymes.”

The shift/reset in question relates to the relationship between currency and money, which is probably about to change. Currency is the fiat denomination printed (inflation) by a nation to use as a store of value and a means of exchange. 

Bretton Woods

Being made of paper or low-grade metasl representative of precious metals, it is tangible, valuable, shiny, held in the hand. Despite this description, it holds no intrinsic value whatsoever.

The last time this relationship changed was on August 15, 1971, when Richard Nixon brought about the end of the Bretton Woods agreement. That agreement, made at Bretton Woods, New Hampshire, pegged the US dollar (as the world reserve currency) to gold, while all other fiat currencies were pegged to the dollar. 

Essentially, this meant the dollar was now backed by itself – the petro dollar deal with the House of Saud and (unspoken) the might of the US military. From 1971 to 1980 gold went from $40 an ounce to $850 – roughly a 20 times uptick. Silver performed even better, rocketing from $1.50 to just under $50 – roughly a 30 times move.

Bretton Woods 2.0

There is much speculation that another currency/money reset is not just possible but imminent. With the advent of stablecoins and cryptocurrencies, financial hypotheses include these new technologies being backed by statutory re-priced gold and silver being used to settle chunks of sovereign debt, whilst allowing for international agreement on a world reserve currency without starting World War III.

This reason alone would account for “smart money” taking positions in the incoming financial system, with the large financial institutions, such as central banks, governments and corporate entities, swapping useless fiat currencies for gold and silver before news of a reset.

China pulling the strings

China has reportedly printed 48 trillion Yuan (690 Billion USD) in a relatively short amount of time. Plenty of this has been allocated to the purchase of silver, in particular from other major producing countries. 

Not only this, but they are the third largest producer of silver in the world and have now introduced very tight controls on how much they are willing to export, for reasons most likely driven by industrial demand, notably the AI race they are in with the US.

‘Swimming with no shorts on when the tide goes out’

The silver price on the SME has consistently been in between $10-15 higher than the spot price to be found in any Western exchanges. The difference being that any metals bought on the SME are deliverable and are therefore the actual price for an ounce of silver, whereas the COMEX (Commodity Exchange, based in New York) and LBMA (London Bullion Market Association) have long been thought to be struggling to deliver, and are very probably going to end up being found, in the words of Warren Buffet, “swimming with no shorts on when the tide goes out.” That’s due to their paper contacts model, which sells the same ounce of silver to multiple clients.

NOTE: This is the opinion of this columnist and should in no way be seen as independent investment advice.