Shanks led world record holder Sarah Hammer (USA) for all but the final lap of their 3000m individual pursuit final before the American unleashed a blinding finish to pip the New Zealander by .029sec in the gold medal ride at the Apeldoorn Velodrome.
While it was a bitter blow for the 2009 world champion from Dunedin, Shanks was pleased with her performance in a well judged ride.
"When you get as close as that it's pretty gutting. So the first reaction is pure disappointment, but I think also I have to be very happy with the ride I executed. Sarah was the better rider today. She went faster," Shanks said.
"I have to be pleased with my performance but today it was only good enough for silver.
"I had to go out on my own race plan and then race her in the second half and I did. I was up on her with four laps to go and it was even with two to go. She just had that little bit extra and it was only 2/10ths of a second in the end.
"I put everything out there on the track today so I can't be too disappointed. She just went faster and I have to be satisfied with silver today."
Shanks made a strong start to be up by .2sec at the 1km mark and extended to .8sec at the 2km. The lead was still .4sec at the 2500m and even with a lap to go before Hammer edged ahead to clock three minutes 32.933 seconds to the time of 3min 33.229sec for Shanks.
Teammate Jaime Nielson was beaten by Lithuania's experienced Vilija Sereikaite for bronze in her first time in an individual medal ride at a world championship for the former rower.
Earlier Shanks clocked 3min 33.789sec in qualifying, which was just .025sec behind Hammer's time, with the New Zealander controlling her pace well. Nielsen went 3:38.921 in qualifying to be fourth fastest, just .8sec slower than Sereikaite.
Mid-Canterbury's Lauren Ellis posted the eighth fastest qualifying time of 3min 44.165sec.
Meanwhile Shane Archbold is in fourth place after the first day of the men's omnium, a six-discipline event staged over two days.
Second overall in the world cup rankings, the 22-year-old had a splendid flying lap, finishing fourth fastest in 13.457sec, only just outside his personal best despite the heavy track.
Archbold struggled with the pace in the points race but rode cleverly to avoid going down a lap to finish 12th which dropped him back to 10th overall.
He rode with real maturity and nous to finish fourth in the exciting elimination race which jumped him to fourth overall. The key to a medal tomorrow will come in the individual pursuit and kilo time trial, with the scratch race also on the programme in this gruelling event.
Earlier Tom Scully did not finish in the men's 40km points race.
