Why Physical Ownership is Driving the Next Bull Phase

Gold and silver have entered a period of transition, revealing a deeper shift beneath the surface of short-term volatility, as Andrew Maguire points out in the latest episode of the Live from the Vault weekly show. What looked like a routine correction in the paper markets has instead exposed the growing strength of physical demand and the declining influence of speculative, leveraged trading. This evolving landscape points to a more structurally resilient future for both metals, underpinned by long-term holders and global monetary realignment.

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The recent pullback in gold and silver was largely driven by engineered paper-market mechanics. Leveraged speculative positions were flushed out through sharp margin adjustments and sudden liquidity withdrawals. Gold fell around 10% from its highs, while silver corrected approximately 15%.

However, instead of undermining confidence, these moves redistributed metal from speculative “hot money” into long-term, physically backed ownership. Central banks, sovereign wealth funds and institutional buyers stepped in to absorb supply as soon as prices dipped to key-support levels. 

This shift in ownership has created a stronger, more durable price floor. Rather than signalling a breakdown, the correction laid the groundwork for a new, higher stair-step base supported by committed physical-market participants.

Silver has become a powerful indicator of underlying physical conditions. For weeks, spot silver has held above futures prices, a condition known as backwardation. This typically reflects tight supply and increased demand for immediate delivery. In today’s market, it highlights a persistent physical shortage that synthetic futures cannot mask.

Much of the most reliable price discovery now comes from the Shanghai Gold Exchange International (SGEI), which offers physically settled contracts and reflects underlying demand in Asia. While Western paper markets have been pressured by speculative selling, the SGEI has continued to indicate strong appetite for immediate-delivery silver. This divergence illustrates a broader trend: physical markets are gaining influence as paper benchmarks lose relevance.

With physical tightness increasing, sub-$50 silver is becoming an increasingly rare opportunity. Liquidity providers are now projecting a move back through previous highs sooner than expected. Some early forecasts indicate silver could reach the $80 area in early 2026, with potential spikes toward $140 under conditions of forced short covering and continued supply constraints.

Gold has shown a similar pattern of buying strength. Multiple attempts to force gold below the $4,000 level failed as physical buyers consistently stepped in. Central banks and institutions have been accumulating at these levels, absorbing all ETF outflows and futures liquidation. This accumulation helped cleanse the market of speculative trend-following funds, leaving gold with a healthier structural foundation.

Long-term investor demand is returning in force. Some bullion banks, historically cautious or even bearish, have shifted to a more constructive outlook as they respond to strong client interest. End-of-year projections continue to point toward the $4,500 level, with extended targets reaching as high as $8,000 by 2026 under sustained global physical demand.

This behaviour demonstrates that attempts to suppress gold prices are becoming less effective. Each dip is met by larger, more determined buyers, presenting ongoing challenges for entities relying on synthetic price control.

Beyond short-term market action, a deeper structural transformation is underway. China’s SGEI is increasingly emerging as the world’s central hub for physically settled gold and silver trading. More nations are choosing to store reserves within this system, recognising the benefits of transparent, physically backed settlement. Cambodia’s recent decision to keep part of its gold reserves there is one of several similar developments.

China’s long-term strategy, combining yuan–gold convertibility, international settlement hubs, and decades of steady physical accumulation, has positioned the SGEI as a growing alternative to Western paper-heavy systems.

This trend marks a shift away from Western benchmarks such as COMEX and the London Bullion Market Association (LBMA), which rely heavily on unallocated gold and derivative exposures. As physical markets strengthen, these paper-based structures face increasing pressure and diminishing influence.

For investors, this evolving environment offers a moment of strategic advantage. The correction has created temporary opportunities to acquire physical bullion at levels that do not fully reflect global demand or systemic supply constraints. As the market transitions toward physically driven price discovery, real-asset holders stand to benefit from future revaluations.

The structural forces at play – global de-dollarisation, central bank accumulation, export controls, and the rise of physically settled Asian markets – suggest that gold and silver may be entering a new phase of long-term appreciation.

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