Silver Takes a Breather After Testing $90
After flirting with the psychologically important $90 level, silver pulled back sharply today, dropping 4.74% to $83.53. While the correction might sting for recent buyers, the broader picture remains constructive for precious metals stackers.
The Shanghai Story Continues
The most telling metric today isn't the spot price drop—it's what's happening in Asia. Shanghai silver closed at $97.68, maintaining a 16.8% premium to London spot prices. This premium has persisted above 15% for weeks now, signaling genuine physical demand despite paper market volatility.
| Market | Price | Premium to Spot |
|---|---|---|
| London Spot | $83.53 | — |
| Shanghai | $97.68 | +16.8% |
| Previous Shanghai | $102.45 | +16.8% |
For context, Shanghai premiums typically range 0-5% during normal market conditions. The current 16.8% premium suggests Asian buyers are willing to pay significantly more for physical metal, even as COMEX futures sold off.
Gold-Silver Ratio Compression Accelerates
Today's silver pullback was actually less severe than gold's decline, pushing the gold-silver ratio down to 55.73. This represents a significant compression from the 80+ levels we saw just months ago. Historically, ratios below 60 have marked favorable entry points for silver relative to gold.
The CFTC's latest COT data shows commercial traders holding a net short position of -40,535 contracts—elevated but not extreme. This suggests room for further upside once the current correction runs its course.
Physical Market Remains Tight
Despite the paper price pullback, physical premiums tell a different story:
- American Eagles: 14.3% premium (up from 12% last week)
- Generic rounds: 8.5% premium (steady)
- Junk silver: 3.8% premium (compressed but available)
The premium expansion on Eagles while spot prices fell indicates dealers are experiencing supply constraints on popular retail products. Meanwhile, junk silver's compressed 3.8% premium offers the best value proposition for stackers today.
What to Consider
Junk silver at 3.8% premium represents exceptional value in today's environment. With constitutional silver (pre-1965 US coins) trading at less than half the premium of Eagles, stackers should consider building positions here. The arbitrage opportunity between junk silver's 3.8% premium and Eagles' 14.3% premium rarely gets this wide.
For those waiting to add to positions, watch for silver to find support around the $80-82 range. A bounce from these levels would confirm the correction is healthy profit-taking rather than a trend change.
Bottom Line
Today's 4.7% pullback feels dramatic after silver's recent run, but the physical market fundamentals remain strong. Shanghai's persistent 16.8% premium and expanding Eagle premiums suggest this correction is paper market noise against a backdrop of genuine physical demand. Junk silver's compressed premium offers stackers the best entry point in months.
References - LBMA Silver Price: https://www.lbma.org.uk/prices-and-data/precious-metal-prices - COMEX Silver: https://www.cmegroup.com/markets/metals/precious/silver.html - CFTC COT Report: https://www.cftc.gov/dea/futures/deacmxsf.htm
Stay Informed Subscribe to Silver Insights updates: Join our mailing list