Silver Squeeze Deepens as COMEX Vaults Run Dry

The COMEX vaults are running out of silver, and the market has taken notice.

Registered inventories have dropped below 80 million ounces, a 75 percent plunge from the 2020 peak. Across the Pacific, China imported a record 836 tonnes in March alone, paying premiums up to $17 per ounce above Western benchmarks. Silver lease rates, which typically hover near zero, have surged to 8 percent. Borrowing physical metal has become a real expense.

The numbers signal a structural breakdown in Western commodity pricing control. COMEX registered silver now covers just 13.4 percent of open interest, well below the 15 percent threshold exchange analysts associate with delivery stress. The Silver Institute used the phrase "era of reduced stocks" for the first time in the survey's 36-year history, acknowledging six consecutive annual deficits totaling 762 million ounces.

The physical shortage unfolded as Western exchanges struggled to suppress prices through margin hikes. Between Jan. 23 and Jan. 31, the CME raised margins from 15 percent to 18 percent, then to 11 percent of notional, then applied 36 percent increases across silver futures. On Jan. 30, silver futures plummeted approximately 31 percent, its worst daily fall since March 1980, from an all-time high of $121.64.

Paper market mechanics did little to mask what physical indicators revealed. Lease rates held between 6 and 8 percent. Inventories continued draining. The CME's technical halt on Feb. 25-26 arrived precisely 48 hours before March First Notice Day, compounding delivery stress when 400 million ounces of open interest faced just 86.1 million ounces of registered metal.

China's record imports show exactly where the physical metal flows. The country imported 836 tonnes in March 2026, 173 percent above its 10-year seasonal average and the highest total on record per Chinese Customs Authority data. Two unrelated buyer groups drove the spike. Retail investors substituted silver for gold as gold approached $5,500 per ounce. Solar manufacturers front-loaded production before the April 1 removal of export tax rebates.

Beijing's export controls fragmented global supply chains. Effective Jan. 1, 2026, China restricted silver exports to 44 state-approved companies requiring minimum 80-tonne annual refined output and credit lines above $30 million. Previously, China exported 4,000-plus tonnes annually, representing 60 to 70 percent of global refined silver exports. China reclassified silver as a strategic material, applying the same treatment used for rare earths, tungsten, and antimony.

The Shanghai premium over London benchmarks climbed to $14 to $17 per ounce. "JP Morgan has been shipping metal eastward at premiums of ten dollars an ounce or more above COMEX prices, with the VAT tax falling on the Asian recipient," reported RealClearMarkets analysis on Mar. 17. "That buyers absorbed both the premium and the tax — willingly, repeatedly — says something about how urgently they valued the physical bar over any paper substitute."

Institutional buyers are moving on this physical reality. Andy Schectman of Miles Franklin Precious Metals calls COMEX delivery flows a "full-blown run on physical metal — driven by the biggest money in the United States standing for delivery at levels the exchange has never seen." The Sprott Physical Silver Trust doubled its capital raise to $2 billion in January 2026, enough to buy approximately 18 million ounces. That single institutional move represents roughly 16 percent of COMEX registered inventory.

Analyst forecasts reflect the market's structural uncertainty. The Reuters poll of analysts previously projected a 2026 average of $79.50 per ounce, up from $50 in October 2025. The most recent April 27, 2026 poll lowered the figure to $78 per ounce. Bank of America targets $135 to $309 based on gold-silver ratio compression. Citigroup targets $150 to $170. JPMorgan remains more cautious at $81 average, while UBS targets $85 year-end.

"Silver 'has clearly entered an era of reduced stocks,'" states the Silver Institute's World Silver Survey 2026 on page nine, using this language for the first time in the survey's history. "Tightness will not be constant, but liquidity will generally be thinner, lease rates more volatile and price moves likely to be larger than investors have grown used to."

Supply constraints compound the shortage. Approximately 70 percent of silver is a byproduct of copper, lead, zinc, and gold mining, making supply inelastic to price signals. Global mine production in 2025 reached about 846 million ounces. Forecasts for 2026 project essentially flat output at 844 million. Fresnillo, the world's largest primary silver producer, cut its 2026 guidance in January 2026, reducing the top-end estimate by approximately 9 percent from 51 million to 46.5 million ounces.

"The Comex Silver Crisis is Real," declares GoldFix in a ZeroHedge article published May 1. "COMEX is, as we have asserted for over a year now and hinted at going back to 2023 — DYING, and along with it western dominance in setting the price of silver."

Price discovery is migrating eastward. The Shanghai premium, the record Chinese imports, the lease rate explosion, and institutional physical runs all point to a market where Western futures exchanges are losing their monopoly. COMEX still functions, but its credibility erodes as institutional capital demands metal rather than paper, and Asian buyers pay premiums that Western exchanges cannot arbitrage away.

Silver trades near $75 to $78 per ounce as of May 2, but the physical market tells a different story than paper prices suggest. Coverage ratios sit at critical lows while Eastern demand absorbs available supply. The structural shift from paper-based price discovery toward physical reality reflects a broader challenge to dollar-denominated financial systems. Traders who once trusted Western exchanges to set the price now watch their vaults empty, and wonder who will hold the power next.