Silver Shortage?

Is There a Silver Shortage?

Because silver is a precious metal that doubles as an industrial metal with significant usage in everything from solar panels to AI data centers and EV cars, silver is expected to face its sixth annual supply deficit in 2026. This means that for the last five years, we used more silver than we mined and processed. This means that we’re expecting the same in 2026 – with a forecasted shortfall of 150 to 200 million ounces or more, driven largely by industrial demand, China’s new import restrictions, and limited supply growth.

Why Don’t They Just Dig More Mines?


Although silver’s value has risen this last year rather quickly, new mines move slowly, taking decades from discovery to finished product available in the marketplace. What’s more, unlike some metals, roughly 70 percent or more of silver is actually derived only as a byproduct of copper, zinc, and lead mining. Which is to say that in the majority of mining operations, they’re actually mining for something else, and silver is kind of like a happy, but valuable, coincidence.

Shortage Is Not Temporary


All this to say that the shortage of silver – the inability of mines to keep up with current (never mind increased future demand as more and more AI data centers are built) is not a “temporary disruption.” As we enter the sixth year of significant silver supply deficits, it’s safe to say the shortage is structural. And, given the difficulties associated with opening new mines, it’s also safe to say that help in the form of newly discovered and operational mines is not expected anytime soon.

In Short Supply, Silver Declared ‘Critical Mineral Resource,’ ‘Strategic Asset’


Given the structural shortage of physical silver, it’s perhaps not surprising that both China and the United States recently declared silver to be a “critical mineral resource.” Notably, Russia’s central bank began hoarding silver as a strategic asset these last two years, and India, which is currently the world’s largest consumer of silver, has recently instituted a banking policy that for the first time allows people and businesses to use silver as collateral for loans.

US Builds Smelter To Change Balance of Power in Critical Metals


Given that China actually processes approximately 70 percent of the world’s silver and imposed import restrictions on the critical metal early in 2026, it is perhaps also not surprising that the United States government (Department of War, Department of Commerce) is attempting to alter that balance of power and has contracted to build a giant smelter in Tennessee capable of processing silver and other critical metals. The smelter, which will cost $6.6 billion dollars to construct, is scheduled to break ground in 2026 with anticipated completion in 2029.

What About the Silver All Of Those People on Wall Street Trade in 1000s of Ounces?


Funny you should ask. But we’ll know more as we enter March. When traders buy and sell silver on the exchanges, such as Comex, they are given the opportunity to buy the standard contract of 5,000 ounces or a “micro contract” of 1000 ounces at a future date for a set price. Traders buy and sell these contracts, and each month millions of ounces of silver trade hands – on paper. When the settlement date comes, the person with the contract has the ability, however, to be paid off either in cash or actual silver. For years, almost everyone took the cash. This year is different. A simple Google search on “physical silver shortage Comex USA” turns up this:

Here’s What It Says:

In early 2026, the COMEX silver market in the USA is facing an severe, accelerating shortage, characterized by a rapid drain of registered inventories and high demand for physical delivery. Over 33 million ounces were withdrawn in a single week in January 2026, leaving registered stocks covering only a fraction of open interest.

Key 2026 COMEX Silver Shortage Drivers & Data:

• Inventory Drain: As of late January 2026, total COMEX registered inventory (available for delivery) fell significantly, with some reports indicating it only covered about 14% of total outstanding paper claims.

• Physical Demand Spike: A shift in market psychology has led to, in some cases, 99% of futures contracts in certain, smaller, delivery months being delivered physically, as reported by Investing.com.

• Backwardation: The futures curve has shown strong backwardation—where immediate delivery prices are higher than future contracts—signaling an acute, immediate shortage, noted by Seeking Alpha and FXStreet.

• Industrial Demand: High-volume, "at any cost" buying from industrial sectors, specifically for green energy (solar) and technology, is driving the depletion, according to Phoenix Refining.

• Price Action: Analysts have highlighted a potential, significant "divorce" between the paper, COMEX-driven price and the actual, physical, in-hand price of metal, with some, like Investing.com, suggesting a, potentially, higher price for physical, as highlighted in this, article, on Investing.com. 

Market Sentiment:


The situation is leading to intense, speculation, about potential, "cash, settlement," if the exchange, cannot, meet, physical, demand, according to Investing.com. Some, investors, are, viewing, this, as, the, "great divorce" of physical, vs. paper, silver, as discussed in this, article, on Investing.com.

Silver Default?

As noted, as the price of silver has risen and news of the actual physical shortage of silver has become more commonplace, more traders have chosen to call for physical delivery. And that’s a problem. 

But ok, what are the numbers? Once again, Google is your friend. Let’s look at January 2025 vs. January 2026.

Numbers

The simple Google search is “how many ounces of silver comex physical deliver January 2025 January 2026”

Here’s What It Says:

COMEX silver physical deliveries for January 2026 reached approximately 49.4 million ounces, representing a massive increase (over 4x) compared to the roughly 12 million ounces delivered in January 2025. This surge reflects unprecedented demand for physical metal, with total 2025 deliveries hitting 474.4 million ounces.

Key Details on COMEX Silver Physical Delivery:

• January 2026: Roughly 49.4 million ounces were delivered, with reports indicating 33.45 million ounces withdrawn in just the first half of the month.

• January 2025 vs. 2026: January is typically a quiet, non-delivery month (historically 1-2 million oz), but saw ~12 million oz in 2025 and exploded to 49.4 million oz in 2026, marking a 4.17x increase.

• Inventory Impact: The 2026 demand spike removed roughly 26% of the total COMEX registered inventory in a single week.

• Acceleration: Total 2025 deliveries were 474.4 million ounces (doubled from 2024), with February 2026 continuing to show near-total demand for physical, surpassing 98% in some reports. 

The data highlights a significant "short squeeze" scenario where, by early 2026, investors are demanding physical metal rather than rolling over contracts.

On February 26, traders will have their first chance to declare if they want physical silver instead of cash for March delivery. A number of precious metals analysts are saying that Comex, the central clearing house for U.S./Wall Street silver trading, is about to actually run out of silver. That, if just 20 percent of those who have the right opt for physical silver in March, the vault will be empty. Comex will have to cancel the actual silver delivery (importantly, I’m told their contracts say they have the right to do this). So… Comex will have to issue checks instead of the actual silver purportedly promised (always read the fine print). And if not March, beware April, May, and June.

Price of Silver When There Is No Silver?


What effect will a default in silver contracts (paper silver) have on pricing for actual physical silver? Nothing in the precious metal market is ever definite. But scarcity has a tendency to drive up prices. And default? The largest silver trading house in the world having to admit they have no actual silver to deliver to fulfill its contracts and can only deliver cash? I don’t know, but I can’t believe this will engender faith in the paper silver market. That being said, I significantly upped the physical ounces in my own stack this month, and my stock portfolio is up to more than 50 percent in companies and mines that have real, actual silver.