Silver's $74.60 Plunge Masks Historic Supply Squeeze as COMEX Reserves Collapse 61%
Published on 05/28/2026 at 04:01 | Redaktion boerse-global.de
Silver has endured a rough week, sliding 2.6% to $74.97 on Wednesday and extending losses the following session to $74.60 — a 3.05% single-day drop. The metal remains up more than 126% year-to-date, but a confluence of geopolitical jitters and hawkish Fed expectations is overwhelming the market in the near term.
The trigger was a fresh escalation between the US and Iran. Tehran accused Washington of violating the ceasefire by striking targets near the Strait of Hormuz, reigniting fears of an energy-driven inflation shock that could force central banks to keep monetary policy tight. Kevin Warsh was sworn in as Fed chair last Friday, and the bond market is increasingly pricing in rate hikes rather than cuts. For non-yielding precious metals, higher opportunity costs are a clear headwind. Silver has lost nearly 20% since the conflict began, with investors awaiting further comments from Fed officials for directional cues.
Yet beneath the paper-price turmoil, the physical market tells a radically different story. The Silver Institute’s latest World Silver Survey, compiled with Metals Focus, projects a supply deficit of 46.3 million ounces in 2026 — widening from 40.3 million ounces in 2025. Since 2021, the market has drawn down a staggering 762 million ounces from above-ground inventories to plug the gap, a drawdown analysts describe as unprecedented in modern history.
The industrial side is undergoing a structural transformation. Solar manufacturers, once the fastest-growing source of silver demand, are pivoting away from the metal as prices climb. Demand from photovoltaics fell 6% in 2025 to 186.6 million ounces and is forecast to plunge another 19% in 2026 to around 151 million ounces. Thrifting strategies and copper substitution are accelerating: Longi Green Energy Technology will begin mass production of copper-based back-contact cells in the second quarter of 2026, Jinko Solar plans large-scale copper panels, and Shanghai Aiko Solar Energy has already launched silver-free cells.
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That industrial retreat, however, is being more than offset by physical investment. Global coin and bar demand jumped 14% in 2025, with India surging 33%. Exchange-traded products recorded net inflows of 68.3 million ounces last year, and the Silver Institute expects a further 18% rise in physical investment in 2026 — the highest since 2022.
The most dramatic signal of scarcity is in COMEX registered inventories, which have collapsed 61% from 201 million ounces in September 2025 to just 79.27 million ounces by April 2026. China’s silver imports exploded 78% month-on-month in March 2026 to around 836 tonnes, nearly triple the historical average. The Shanghai Gold Exchange quoted silver at roughly $95.60 per ounce in March, while the LBMA benchmark in London was around $84.00 — a 14% premium that screams acute physical tightness.
India is also piling in. The country’s silver imports hit a record $12 billion in fiscal 2025/26, and April imports alone were 157% above the prior year. In response, the Indian government tightened import rules for certain silver bars in May to manage the flood.
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The sector’s structural bottleneck remains supply rigidity. About 70% of global silver output is a byproduct of lead, zinc, and copper mining — production decisions are driven by base-metal economics, not silver prices. So even as industrial demand from photovoltaics slips — total industrial offtake is seen falling 3% to 639.6 million ounces in 2026 — the shortfall is being filled by investors, and with above-ground stocks already severely depleted, every ounce of new demand tightens the screw further.
Silver is caught between macro headwinds and a physical market that is screaming scarcity. For now, the paper price is taking the heat, but the dwindling inventories and widening premium in China suggest the pendulum may swing just as abruptly the other way.
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