What evidence exists for physical delivery shortages versus paper-market imbalances in silver in 2025–2026?
Executive summary
The evidence through late-2025 and early-2026 points to both genuine physical tightness in silver markets and distortions generated inside the paper (futures/ETFs) layer of trading; the question is which is primary, and the reporting shows credible signs of real delivery stress—warehouse draws, sharp premiums in Shanghai and retail coin markets, and spiking lease rates—alongside heightened leverage and liquidity stress in paper instruments that amplify price moves [1] [2] [3] [4]. Interpreting the causal weight of each requires separating observable delivery metrics from more speculative narratives about coordinated squeezes and systemic collapse that appear in some outlets [5] [6].
1. Physical-delivery evidence: inventory draws, regional premiums, and retail shortages
Multiple market reports document inventory declines and localized premiums consistent with deliverable tightness: Shanghai exchange stockpiles fell to multi‑year lows and the SGE displayed a large premium over COMEX late in 2025, which commentators treat as a sign physical imbalances persisted into 2026 [1]; London and other physical hubs reportedly experienced near‑runouts and unusual flows into the U.S. tied to holiday demand in India, reinforcing that available deliverable metal was being depleted [7]. Retail and dealer premiums on common coins widened noticeably—British and American one‑ounce coins moving several dollars above spot is cited as a practical indicator that consumers faced constrained physical availability [8] [2].
2. Market mechanics that signal true delivery stress: backwardation, lease rates, and delivery notices
Classic delivery‑stress metrics also showed strain: silver markets moved into episodes of backwardation and lease rates spiked—reports cite month‑ahead lease rates surging into double digits and even into the 30s at peaks—signals traders could not readily source lendable metal and were paying to borrow physical bullion [2] [9]. Daily COMEX delivery notices and reported “issues and stops” in early January 2026 have been highlighted by some observers as evidence of intense delivery competition for specific contracts, which, when viewed alongside inventory draws, supports a narrative of constrained physical availability [5] [4].
3. Paper-market imbalances: leverage, ETFs, and the price disconnect
Concurrently, multiple sources emphasize that the paper layer—futures contracts, ETFs, and other derivatives—amplified price signals: a widening disconnect between paper contract prices and dealer/physical prices is repeatedly documented, and commentators warn that large notional exposures can represent multiples of available deliverable metal, creating systemic counterparty and liquidity risks if price moves force margin squeezes or forced liquidations [6] [10] [11]. Reporting flags margin increases and “squeezes” on paper traders as contributors to rapid price acceleration, meaning part of the rally reflects financial stress inside the paper universe rather than only spot physical scarcity [2] [4].
4. Catalysts and structural drivers: Chinese policy, industrial demand, and multi‑year deficits
A consistent structural explanation appears across industry pieces: persistent multi‑year deficits (with inventories drawn down through 2025), rising industrial demand for green and electronics applications, and new Chinese export restrictions effective January 2026 that concentrate refined supply risk are advanced as durable drivers of physical tightness [12] [13] [14]. Analysts point to China’s dominant share of refined supply and export licensing as a potential accelerator of global delivery shortfalls, a policy risk that could make physical scarcity more acute even if some paper‑market distortions unwind [13] [14].
5. Where reporting diverges, and the limits of the public record
Not all accounts agree on magnitude or implications: some outlets portray an existential “structural breakdown” and predictions of triple‑digit silver as an almost inevitable outcome [6] [14], while others emphasize volatility and the possibility that paper market credibility or new supply responses could narrow the gap [12] [11]. Several more sensational claims—large secret authorization lists, or single‑day “Blue Whale” conspiracies—appear in commentary and community posts but are not fully documented in mainstream delivery or inventory reports provided here [5]. The publicly cited, verifiable indicators remain exchange inventories, premiums, lease rates and delivery notices; beyond those metrics the record contains interpretation and advocacy as much as hard proof [1] [2] [4].
Conclusion: synthesis and actionable reading of evidence
The most defensible reading of the sources is that measurable physical stress existed in late‑2025 and carried into 2026—manifested in withdrawn exchange stocks, regional premiums, coin dealer scarcity, backwardation and elevated lease rates—while paper‑market imbalances (leverage, concentrated notional exposures, ETF dynamics) amplified price moves and created acute liquidity risks; policy shifts in China and sustained industrial deficits provide plausible channels that convert paper dislocations into enduring physical tightness, but sensational systemic collapse narratives go beyond the verifiable indicators cited in the reporting [1] [2] [13] [4].