The Next Silver Squeeze May Be About Geography, Not Supply
Silver can be sitting in an American vault while a London dealer struggles to find metal for immediate delivery. Both can be true: inventories exist, yet a particular part of the market lacks available bars. What matters is who owns them, whether they will release them, their specifications, and when they can arrive.
The October 2025 squeeze showed that the gap between metal existing and being usable carries a real price. Analysts in this year’s LBMA survey also described national stockpiling driven by trade uncertainty. For us, that raises a more precise question about the next squeeze: can the market move the right silver quickly enough? Global inventory ≠ immediately available inventory. The decisive factor may be how quickly the last required ounce can be delivered.
London Showed Why Higher Mine Output May Not Prevent Local Tightness
According to the World Silver Survey 2026, transfers into CME vaults, falling inventories, growing exchange-traded product holdings, and stronger bar and coin demand contributed to the October 2025 squeeze. The result was intense pressure on liquidity and metal borrowing rates.
Yet global mine production rose 3% that year to 846.6 million ounces. This does not mean the global balance was healthy: demand still exceeded supply. It does show why annual production alone cannot explain silver’s availability on a particular day in a particular trading center.
An annual balance measures metal flows over twelve months. A dealer facing a delivery obligation operates on a much shorter timeline. Additional output still being processed, or committed to another buyer, may offer little help.
Physical tightness can therefore develop without a sudden mining disruption. Immediate delivery needs only have to outpace the market’s ability to release and relocate existing stocks. A global deficit can reduce the buffer against such situations, but it does not automatically determine where or when they occur.
Tariff Uncertainty Can Give Inventories a Reason to Stay Put
In the LBMA’s 2026 forecast survey, Suki Cooper of Standard Chartered linked elevated national stockpiles to concerns about metal availability, tariffs, and trade tensions. She also described how clearer rules could allow U.S. inventories to normalize and improve physical liquidity. This was one analyst’s outlook, rather than evidence that normalization must happen.
The economic mechanism is straightforward. If a company sees future imports as potentially more expensive or difficult, metal already imported gains additional value: it protects against uncertain conditions for the next shipment. Selling it overseas means surrendering that protection.
In our view, this means an ordinary price difference between markets may not be enough to move inventories. An owner may demand a higher price because the decision also involves the risk of replacing those stocks later. Warehouse reports cannot tell us the exact value of that protection.
A new trade barrier does not even have to be in place. Uncertainty alone can change behavior. The metal may be physically accessible while its owner is unwilling to accept the risk of releasing it. Inventories can consequently rise in one country while obtaining metal elsewhere becomes more expensive.
A Warehouse Total Does Not Tell Us How Many Ounces Are for Sale
Geography also has an ownership dimension. Bars can be in the right city but held by an investor unwilling to sell, or by a product whose rules require a particular process before they can be released.
An estimate from Metals Focus, reported by Reuters in April 2026, illustrates the distinction:
| Period | Share of London silver not tied to ETPs |
|---|---|
| September 2025 | 17% |
| End-March 2026 | 28% |
| Change | +11 percentage points |
These are historical estimates of potentially more available stocks, rather than today’s supply offered for sale. Metal outside ETPs may still belong to someone unwilling to sell or lend it. Equally, silver held by ETPs should not automatically be considered permanently locked away.
U.S. warehouse categories require similar care. COMEX registered silver has a warehouse warrant and sits within the exchange delivery system. That still does not mean its owner is offering it to anyone at the current reference price.
We therefore track the different systems separately in our Inventory Tracker. Adding London, U.S., and Shanghai stocks together can produce a large number. It cannot, by itself, tell us how much metal a particular participant can obtain to meet an obligation.
The Right Purity Does Not Guarantee the Right Delivery
Form creates another obstacle. An ounce in jewelry, a retail coin, and a wholesale bar shares the same underlying chemistry. Those forms are not immediately interchangeable for contract settlement.
London’s Good Delivery rules determine which bars can settle a Loco London contract. Beyond the metal itself, an approved manufacturer and the bar’s specifications matter. Silver somewhere in the production chain cannot therefore be treated as finished wholesale inventory.
A coin owner may respond to higher prices by selling. But if that silver needs to become another product, processing must follow. The time required may exceed the deadline troubling the buyer.
The Silver Institute reported that recycling rose 2% in 2025 to 197.6 million ounces, while refinery bottlenecks limited volumes. A stronger incentive to sell does not automatically generate an equally rapid increase in usable bars.
Similarly, a high physical premium on a particular coin can reflect limited manufacturing or distribution capacity. It need not prove a shortage of wholesale silver. To interpret the price properly, we need to know the product, location, and delivery lead time.
Arbitrage Needs Time, Financing, and a Workable Route
Price differences create an incentive for arbitrage: buying metal in the cheaper location and delivering it where prices are higher. On a screen, the trade can look easy. In practice, its return must cover the entire transfer.
The buyer needs capital for the purchase, transportation, and insurance, plus access to suitable metal and arrangements for its acceptance at the destination. Financing inventory during transit also incurs cost of carry, the expense of holding it over time.
According to the LBMA’s guide to futures and OTC markets, the difference between a spot and futures transaction depends on settlement dates, interest rates, transportation, bar requirements, and applicable taxes or regulations, among other factors. The gross spread is therefore not a net profit.
Imagine a buyer who must deliver bars on Friday. Another market has cheaper metal, but the shipment cannot arrive until the following week. It is not an adequate substitute for that obligation, even if the transfer makes sense for another trader with more time.
The price of immediate availability can rise faster than the price of metal for later delivery. That distinction helps explain local tightness better than the global inventory total alone. Higher prices also create an incentive to overcome the obstacle, but the response takes time.
A Squeeze Can Ease Without a Single New Mine
October 2025 also demonstrated the other half of the mechanism. Reuters reported on October 20 that silver arriving from the U.S. and China was easing London’s squeeze. The price difference had become large enough to make even air freight worthwhile.
What matters for our thesis is that moving existing metal relieved pressure where it was needed. The transfer created no new silver and did not, by itself, resolve the annual global deficit. It changed availability in a particular market.
If part of the price pressure represents a premium for delivery speed, restoring smoother flows can reduce that component. The long-term mining outlook need not change. This is why translating an exceptional local premium directly into a lasting price target can be dangerous.
The opposite scenario remains possible. Metal moved into one center can reduce the available buffer elsewhere. If several buyers need the same inventory simultaneously, transportation alone is insufficient, and competition for metal can spread.
The question is whether the transfer satisfies the additional need or merely relocates the pressure. An easing local squeeze is not the same as an end to the global deficit. Equally, a continuing deficit does not guarantee that every regional premium will persist.
What Matters Is Whether the Price Signal Brings Metal in Time
We see the geographic thesis as most useful when it tests how the market functions. A more meaningful claim than “inventories are falling” is that the available price difference has not yet brought suitable metal where it is needed by the required deadline.
Assessing that claim requires several signals together:
- Regional wholesale premiums, adjusted for currency, taxes, product, and delivery date.
- Silver borrowing rates and the nearby futures curve, including any backwardation.
- Actual inventory transfers, changes in ETP holdings, and the subsequent response in availability at the destination.
- Delivery lead times and transportation or processing capacity.
Backwardation alone does not prove a shortage; financing and positioning can influence the curve. The same applies to changes in EFP, which have several drivers beyond physical metal availability.
If premiums and borrowing costs normalize after shipments arrive, the geographic explanation gains support and concerns about immediate delivery ease. If pressure persists despite transfers and appears across several centers, a broader supply-and-demand problem needs investigating. The next squeeze may begin with the question of where silver sits. How long it lasts will depend on how quickly that metal can reach the buyer.
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