"The 1-year silver swap minus the US interest rate is now –7.18%.

That distortion explains why the silver rally is not over.

Only at the red line do supply and demand normalize."

A further six days ago Mercx posted the following commentary:

" The 1-year silver swap minus the US interest rate is now almost –7%! That distortion is the key reason the silver rally is not over.

That spread should be positive, since silver needed in one year comes with storage, insurance, and financing costs.

Extra explanation.

The silver swap rate is a crucial part of the global precious-metals trade. It exists because major players such as banks, producers, industrial users, and investors constantly exchange silver for dollars without physically moving metal from vault to vault. This mechanism keeps the London physical market tightly connected to the New York financial market.

But that system is now under strain. Physical silver today is almost 7% more expensive than silver for delivery one year from now. Swaps were designed to avoid shipping metal around the world, yet today silver is being moved because buyers are demanding delivery.

Holding physical silver isn't easy or cheap.

A $1 million position weighs several hundred kilograms, spread across dozens of heavy bars that require vault space, insurance, and security…

…That question is now being priced in. As long as the 1-year silver swap minus US rates remains below the red line, silver's upside pressure continues. No one knows where supply and demand will reconnect. … "

I've added a trend arrow to the chart that Mercx posted: