How did spot premiums and dealer inventories behave during the 2025 silver lease‑rate spikes?
Executive summary
A sharp spike in silver lease rates in 2025 coincided with acute dislocations between spot and futures prices — spot premiums widened (backwardation) and many retail dealers reported shortages and “out of stock” notices even as exchange-reported stocks were described inconsistently across sources. Several market reports tie the premium and dealer scarcity to immobilized inventories, refinery bottlenecks and frantic arbitrage flows rather than to uniform, singular depletion of global vault holdings [1] [2] [3].
1. Spot premiums surged and the market shifted into backwardation
As lease rates exploded — with one‑month London lease rates reported spiking to roughly 32–39% in October 2025 — spot in multiple centres traded above nearby futures, producing pronounced backwardation and spot premiums over futures that reached dollar‑per‑ounce levels unheard of in recent decades [4] [1] [5]. Reports documented the LBMA‑COMEX spread widening from typical few‑cent levels to more than $2–3 per ounce at peak strain, a direct signal that immediate delivery was being valued far above deferred contracts [5] [6] [7].
2. Retail dealers faced visible shortages even as large‑scale inventory figures diverged
Multiple dealer and mint anecdotal reports described shortages of popular coins and small bars — examples include “out of stock” notices for Silver Britannias and other sovereign products — and dealers raising retail premiums to reflect delivery risk and financing costs [2] [3] [7]. Those on‑the‑ground shortages were echoed by accounts of refineries pausing less profitable production lines and mints seeing elevated finance costs, constraining the flow from large ingots to minted products that consumers buy [2] [7].
3. Exchange inventories were described inconsistently; context matters
Some commentators and analytics pointed to falling deliverable stockpiles, with arguments that exchange‑available metal had been drawn down and that LBMA/COMEX vault holdings were near decade lows in certain series, underpinning the physical squeeze narrative [2] [8]. Contradicting that picture, Reuters highlighted that COMEX inventories were near record highs in early October as large volumes migrated to the U.S., suggesting regional stockpiling and immobility rather than absolute global exhaustion [9]. The apparent contradiction reflects differing measures (location, fungibility, form) and timing across data sources rather than a simple single‑figure story [2] [9].
4. Much of the problem was “immobilized” metal and logistics, not necessarily literal disappearance
Analysts repeatedly emphasized that metal locked in 1,000‑ounce bars in London vaults cannot instantly become one‑ounce coins in U.S. dealers’ showcases; thus high lease rates and spot premiums often reflected the cost and delay of converting and transporting metal — including airfreight arbitrage — more than an absolute global shortage [3] [6] [5]. Reports of banks in Singapore struggling to lease silver and sovereign mint finance stress underline how financing and processing bottlenecks amplified the price signal [5] [7].
5. The premium cycle eased but left structural questions
By late October some sources observed lease rates and premiums retreating as arbitrage flows, festival demand normalization in India, and incremental shipments eased acute strain, yet analysts warned underlying deficits, refinery capacity limits and continued ETF and industrial demand could re‑ignite tightness [6] [8] [7]. Market commentary also presented scenario analyses — from reversal and correction if U.S.–London flows normalize to further upside if London supply remains constrained — showing that spot premiums and dealer inventories were sensitive to logistics and financing dynamics, not just mined supply figures [10] [8].
6. Competing narratives and incentives that shape the record
Sources emphasizing a dramatic physical squeeze often come from market participants and outlets focused on physical bullion markets, which spotlight dealer shortages and lease‑rate pain [2] [8]. By contrast, exchange‑data reporting — including Reuters coverage of concentrated COMEX stocks — highlighted large holdings that can be immobile or held for different uses, which may downplay retail shortage narratives [9]. Each perspective has an implicit agenda: dealers and physical‑market commentators stress delivery risk and premiums; exchange‑data reporters stress headline inventory totals that can obscure availability and mobilization costs [3] [9].