Recently, silver prices have hit new highs again, but the story behind it is more worth paying attention to than the increase itself.

The problem is serious. As the world's largest silver delivery center, London is beginning to show signs of a squeeze. What is the most obvious signal? The one-year silver swap rate differential with US interest rates has fallen to around -7%.

In other words, it now costs more than 7% to acquire silver today compared to delivery in one year. This should not happen in a normal market—storage, insurance, and financing costs would theoretically make forward prices higher. But now it’s the opposite, which only shows one reality: the market is beginning to doubt whether those "paper silver" assets are truly backed.

In the London trading market, a large amount of silver exists under the name of "unallocated," which seems to have ledger records but is actually just a debt promise with no corresponding physical silver bars behind it. As more investors demand physical delivery, the problem explodes— the same silver bar is recorded multiple times across different ledgers.

What is happening simultaneously? Silver prices in Shanghai are significantly higher than in London, indicating that real industrial demand is driving physical silver to shift toward Asia. This is exactly the same pattern as in 2020, when gold flowed heavily from London to New York.

Ultimately, the logic behind silver price increases boils down to three points: extremely inverted financing structures, accelerated physical movement across global markets, and the concentration of paper credit being fulfilled.

So the core issue is not whether the price goes up or down, but whether physical delivery can be truly made. The essence of this silver market situation is less a bull market and more a comprehensive stress test on the entire silver credit system.