What the Developing Global Silver Shortage Means for Buyers

Silver has entered a period of pronounced physical tightness, and the effects are starting to ripple through global supply chains. While headlines focus on record prices and ETF suspensions abroad, the more critical story for buyers is one of availability. Silver is increasingly difficult to source in the form and timing clients prefer — even as spot prices continue to trade normally on screen.

Across major markets, the pressure is mounting. In India, UTI Asset Management, one of India's largest asset management firms, has suspended new investments into its Silver ETF due to an inability to secure sufficient physical metal, with domestic premiums spiking as high as 10 percent above international spot. We are hearing that some bullion dealers and jewellers there have stopped taking new orders outright. These are not speculative price moves — they are direct signs that the world’s largest physical silver consumer is struggling to restock.

Meanwhile in London vault holdings continue to slowly drift lower. LBMA data for September shows another 0.3 percent month-on-month drawdown. While this does not seem like much the reality is that of the silver holding are already sold to ETFs leaving only a small portion available for “free float” trading liquidity.  

“As a result, inventories of silver in London have fallen by a third since mid-2021. However, a large part of that is held by exchange-traded funds. The remaining “free float” of metal available to provide liquidity to the London market — mostly held by big banks — has dropped to just 200 million ounces, down 75% from a high of over 850 million ounces in mid-2019, according to Bloomberg calculations.” Quoted from Bloomberg: Silver Traders Rush Bars to London as Historic Squeeze Rocks Market.

Borrowing and lease rates have climbed sharply which is causing distributors and large banks, who often lease the metal rather than buy it, to raise metal premiums to pay for the leasing costs. We are also seeing short-term backwardation in futures pricing which confirms the near-term silver scarcity.  

COMEX inventories in New York remain solid for now — but that metal is largely immobilized in the US system for now. Soon we might see a flow of metal out of the United States.

For bullion purchasers, the global mismatch has several practical consequences.

First, delivery times are lengthening. Bars that would normally arrive within a week are now being quoted at extended lead times, particularly for 1 kg and 100 oz formats. 1,000 oz bars are still mostly available but at current demand levels we are rotating though our 400,000 troy oz silver inventory in little more than a week and most arriving shipments are used to fulfil pre-orders.    

Second, premiums are starting to decouple from spot prices. The paper market trades near USD 50 /oz, but the real acquisition cost for physical silver is creeping higher. If India continues to absorb available supply at elevated premiums, it will exert additional pressure on regional wholesalers — including those serving Singapore.

Third, product selection is narrowing. Larger bars may remain obtainable due to lower minting bottlenecks, but smaller formats — especially coins and 1 kg bars — are increasingly rationed or allocated by pre-order. Investors seeking specific brands such as Royal Mint Britannia’s or Perth Mint bars should expect tighter quotas and higher delivery fees soon.  The Royal Mint has suspended new gold and silver Britannia Coins orders last Friday as demand is greatly exceeding supplies.

Our Main Silver Vault (MSV) in Singapore will soon surpass 20,000,000 troy ounces of vaulted silver bullion, representing about 2% of global annual supply. At full capacity, the MSV can hold the equivalent of 32% of global annual supply, completely independent of paper exchanges.  

From a strategic standpoint, these dynamics underscore the importance of location, jurisdiction, and relationship. Singapore remains one of the few jurisdictions with both robust logistics infrastructure and access to multiple refining and distribution networks. We have built strong supply relationships over these past 15 years and are confident that we will be able to secure silver supplies for longer than most.   

Unlike the kind of unallocated and lease based (“IOU”) silver positions that are so dominant in the market our clients always own their silver as legal title owners and we do not lease, borrow or leverage metal ourselves. We buy bullion outright, securely vault it ourselves and wait for overleveraged trading system to fail, firmly protecting ourselves and our clients.  

In short, silver is still available, but less so and at rising cost of immediacy. Clients who value guaranteed delivery should act sooner rather than later, while those holding allocated silver are already benefiting from a tightening market that rewards physical ownership over paper exposure.

Regards

Gregor J. Gregersen