Silver COMEX inventory tightness, Shanghai squeeze, trading halts and volatility episodes within the broader precious metals bull market

The silver market’s structural squeeze and regional fragmentation have deepened further in mid-2026, amid ongoing physical shortages, soaring premiums, and systemic market stresses that continue to challenge traditional price discovery mechanisms. Building on earlier trends, recent developments underscore an intensifying divergence between paper futures and physical silver, a fracturing of global bullion liquidity toward Asian hubs, and evolving supply-side dynamics that collectively reshape silver’s role within the broader precious metals bull market.

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COMEX Silver Inventory Tightness Reaches New Lows, Delivery Risks Escalate

COMEX registered silver inventories have declined further, dipping below 85 million ounces, marking a fresh multi-year low and intensifying concerns over physical delivery availability. This persistent depletion reflects sustained withdrawals driven by delivery demands and physical market arbitrage.

• Inventory levels have shrunk by nearly 10% since early 2026, with no meaningful replenishment observed, exacerbating the risk of a “delivery cliff” where futures contracts may not be fully backed by physical metal.
• Market participants increasingly voice alarm over a potential forced delivery scenario or acute price dislocations, as futures prices remain disconnected from real-world metal availability.
• Mining producers such as First Majestic Silver and Hecla Mining continue to sidestep COMEX futures, preferring direct physical transactions in Asian markets, thereby eroding U.S.-based futures liquidity and price relevance.

This ongoing drawdown deepens the long-standing paper-physical price divergence, where futures prices fail to reflect the tightness seen in physical markets, complicating hedging and risk management strategies.

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Shanghai Physical Silver Premiums Surge to Unprecedented Heights Amid Vault Drains

The Shanghai Gold Exchange (SGE) silver vault inventories have plummeted by over 30% since January, intensifying a severe regional supply squeeze that reverberates globally.

• Physical premiums in Shanghai have surged beyond $10 per ounce over COMEX prices, with spot silver trading near $95 per ounce—levels described by analyst Ian Everard as “completely insane.”
• Market observers report a “vanishing silver” phenomenon as physical metal is rapidly absorbed by industrial users and investors in Asia, creating near-empty vaults and driving a pronounced regional preference for physical over paper silver.
• This premium explosion confirms a structural shift in global silver liquidity toward Asian physical markets, fragmenting what was once a more integrated international bullion ecosystem.

The resulting regional price dislocation amplifies arbitrage challenges and heightens uncertainty for global participants seeking physical silver exposure.

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Exchange Infrastructure Vulnerabilities Highlighted by CME/Globex Trading Halts

The multi-hour trading suspensions on CME Globex during February remain a stark illustration of the systemic fragility in precious metals futures markets amid rising volatility.

• The halts affected silver, gold, and natural gas futures during peak trading hours, disrupting normal price discovery and liquidity flows.
• Analysts including Peter Schiff interpret these interruptions as symptomatic of a paradigm shift—from speculative paper dominance to physical demand-driven market dynamics that existing infrastructure struggles to accommodate.
• These events have increased execution risk for traders, particularly in silver futures where shrinking registered inventories and delivery uncertainties compound operational challenges.

Such episodes underscore the need for market participants to account for infrastructure risk alongside traditional price and physical supply considerations.

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Mexican Junior Silver Producers Poised for Potential Supply Relief, but Uncertainties Persist

On the supply front, junior silver producers in Mexico—home to some of the world’s richest silver deposits—are increasingly spotlighted as possible buffers against ongoing shortages.

• Silver Storm Mining, heralded as “restart ready,” is among a cohort of juniors preparing to ramp up production potentially in the latter half of 2026.
• Industry experts like Keir Reynolds emphasize that Mexico’s vast junior mining sector could materially influence silver availability if regulatory, capital, and logistical hurdles are overcome.
• However, the scale and timing of these restarts remain uncertain, with delays likely to limit near-term impact on the physical squeeze.

While these developments offer a glimmer of hope, the immediate supply landscape remains tight, sustaining upward pressure on premiums and premiums-driven price divergence.

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Gold’s Historic Rally Strengthens Precious Metals Complex, Reinforcing Silver Demand Pressures

Silver’s challenges unfold against the backdrop of a historic gold bull market that continues to reshape precious metals demand fundamentals.

• Gold prices have stabilized in the mid-$5,000s per ounce, lifted by sustained geopolitical tensions, central bank bullion accumulation, and portfolio diversification away from the U.S. dollar.
• The SPDR Gold Trust (GLD) recently increased holdings by 3.43 tons, reflecting growing investor appetite for physical gold-backed ETFs and reinforcing bullion demand.
• Insights from the Rising Bharat Summit 2026, including David Tait, highlight sovereign bullion purchasing as a critical driver of the gold rally, supported by macroeconomic factors such as 10-year Treasury yields surging above 4%.
• The trend of central banks repositioning portfolios, as discussed in “The $13 Trillion Shift,” underscores a sustained preference for physical precious metals as strategic hedges amid broad financial market uncertainty.

This robust gold environment indirectly intensifies demand pressures on silver—both as a monetary metal and industrial input—contributing to ongoing price discovery complexity and structural tightness.

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Investor Implications: Navigating Elevated Volatility, Execution Risks, and Fragmented Pricing

The evolving silver market landscape presents a challenging environment for investors, requiring heightened vigilance and adaptive strategies:

• Volatility remains elevated, fueled by episodic trading halts, shrinking physical inventory pools, and soaring regional premiums.
• The growing paper-physical price disconnect complicates hedging and valuation models, with futures markets less reflective of actual supply constraints.
• Execution and delivery risks have increased, necessitating careful counterparty and infrastructure risk assessment.
• Physical silver acquisition costs have risen sharply, with liquidity constraints intensifying in key regional hubs like Shanghai.
• The dynamic interplay between silver and a soaring gold market adds another layer of complexity for portfolio allocation and risk management.

Investors are advised to closely monitor inventory flows, regional premium shifts, junior producer developments, and exchange technical reliability to effectively navigate this fragmented and stressed market.

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Key Monitoring Priorities Ahead

Given the fluid and stressed silver market conditions, the following indicators warrant close observation:

• COMEX registered silver inventory trends and warehouse flow data as early warning signals for delivery disruptions.
• Shanghai vault levels and physical premium fluctuations to track regional demand strength and arbitrage opportunities.
• Announcements and progress on Mexican junior silver producer restarts to assess potential supply alleviation.
• Exchange infrastructure performance and regulatory developments, including the risk of further trading halts or policy interventions.
• Sovereign and central bank bullion purchase activity, alongside macroeconomic indicators such as bond yields and geopolitical developments influencing precious metals demand.

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Conclusion

The silver market in mid-2026 remains ensnared in a profound structural squeeze marked by acute physical shortages, regional market fragmentation, and stressed exchange infrastructure—all unfolding amid a historic gold bull run driving sustained precious metals demand. Ongoing COMEX inventory declines, explosive Shanghai premiums, and CME trading halts reveal a fragile ecosystem struggling to reconcile paper futures with physical realities. While Mexican junior producers offer potential supply relief, timing uncertainties leave silver’s physical scarcity intact for the foreseeable future.

For market participants and investors, this challenging landscape demands vigilant monitoring, flexible risk management, and nuanced understanding of an increasingly complex precious metals environment—where physical demand dynamics, sovereign flows, and infrastructure resilience will shape price discovery and risk well beyond 2026.