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Physical silver prices in major Asian markets are trading at double-digit premiums over futures contracts on Western exchanges like COMEX, reigniting long-standing concerns about potential manipulation in precious metals markets.
The unusual gap between physical and paper prices has sparked debate among traders and analysts about whether structural imbalances, supply constraints, or deliberate market distortion are driving the divergence.
Silver, long seen as both an industrial commodity and a store of value, has recently shown unusual trading behaviour.
Despite surging investor interest and robust industrial demand, prices on paper markets such as the Chicago Mercantile Exchange (COMEX) have not always kept pace with premiums seen in physical markets across Asia and the Middle East.
“The disconnect between physical silver prices and futures quotes is not typical market behaviour. Such divergences can distort risk perceptions and incentivise trading strategies that don’t reflect underlying economic fundamentals.” Clara Huang, a commodities strategist at Meridian Analytics, said.
While analysts differ on the interpretation of this gap, many agree that it has become a focal point of market anxieties.
Premiums reported in regional physical markets have, at times, exceeded prices reflected on major exchanges by double-digit percentages even as paper futures contracts trade significantly lower.
The core of the current debate centers on the bifurcation between physical silver markets, where actual metal bars and coins are bought and sold.
Also, in paper markets, traders deal in derivatives such as futures, options, and other contracts that may settle in cash rather than physical delivery.
This will happen because paper markets dominate official price benchmarks like COMEX or the London benchmark; any divergence from the reality of supply and demand for the underlying metal can raise eyebrows and foster speculation.
Physical premiums have been particularly pronounced in key hubs like Shanghai, where immediate delivery demands have lifted prices above Western spot references.
Some observers interpret these premiums as signals of constrained supply or lagging delivery logistics rather than deliberate manipulation, an interpretation that’s echoed in recent market analysis.
However, that interpretation has not quelled speculation among traders who see the unusual pricing patterns as evidence of persistent structural imbalances.
“When the paper price and the physical price start telling two different stories, participants look for the cause, and manipulation is one of the first theories to be floated. Whether or not that’s technically accurate, it’s what traders are pricing in right now.”
Rajiv Patel, head of commodity markets research at Axis Capital, said.
Allegations of manipulation in silver markets are not new; they periodically resurface during periods of elevated volatility.
A high-profile case from 2008 to 2016 involving large financial institutions trading precious metals futures culminated in a major settlement in 2020, when one bank agreed to pay nearly $920 million to resolve U.S. regulatory probes into spoofing and other trading practices.
That episode, among others, has become part of the backdrop for current concerns, even though there is no indication that regulators have launched a formal investigation tied to the latest price moves.
Regulatory bodies such as the Commodity Futures Trading Commission (CFTC) and major exchanges have frameworks designed to detect fraud or manipulation, but proving intentional market abuse remains challenging in complex derivatives markets.
Experts note that physical shortages, logistical frictions, and rapid inflows from industrial demand can produce price anomalies without requiring illicit trading. Market watchers also highlight the impact of margin adjustments and technical trading dynamics.
The fallout from silver’s recent price behavior extends beyond traditional commodities desks. Some crypto traders who had positioned silver-linked assets as hedges or safe alternatives to cryptocurrency exposure have faced liquidations or unexpected losses as volatility intensified.
The interconnection between silver derivatives and certain tokenized or crypto-linked products means that swings in one market can cascade into others.
The evolving silver story shows the importance of understanding both structural market mechanics and narrative-driven risk.
As the debate continues over whether current price signals reflect manipulation, supply shortages, or a complex interaction of both, traders are monitoring indicators such as physical premiums, open interest in paper markets, and regulatory commentary for further clues.
