...The root of the problem is that there isn’t enough physical silver. And there are a lot of future contracts.
The market depends on hundreds of millions of ounces of silver stored in London vaults. Over the last several years, there has been a steady drain of metal.
This is primarily due to a persistent structural market supply deficit.
Global demand outstripped the silver supply for the fourth consecutive year in '24. The structural market deficit came in at 148.9 million ounces. That drove the four-year market shortfall to 678 million ounces, the equivalent of 10 months of mining supply in 2024.
The Silver Institute projects a fifth straight supply deficit this year.
The situation was exacerbated earlier this year when tariff worries drove a movement of metal from London to New York to capitalize on the price premium in the U.S.
According to
Bloomberg, silver inventories in London have dropped by one-third since mid-2021.
But the problem is even deeper than that.
Much of the silver in London vaults is already committed to ETFs. That leaves very little “free float” metal to provide liquidity to the London market.
According to
Bloomberg, the amount of free float silver has dropped from a high of 850 million ounces to just 200 million ounces, a 75 percent decline.
In a Substack article, analyst David Jensen said the situation is even worse than
Bloomberg reported. He estimates there are only 140 million ounces available.
There is really only one way to relieve the pressure – make more silver available in London. This can only happen if ETFs sell, freeing up metal for the free float
stock, or by physically moving silver to London from overseas.
An executive at a logistics company said he has received calls from customers seeking to take silver out of New York Comex vaults and move it to London. He estimated traders want to shift between 15 and 30 million ounces of metal between the two hubs. That totals over 2 million pounds of silver...
The price of silver has soared partly due to a massive, short squeeze and a shortage of available silver in London.
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