Silver Squeeze Looms as Inventories Plummet to Near Five-Year Lows
The silver market is flashing warning signals. Registered silver inventories at the Commodity Exchange Inc. (COMEX) have experienced a dramatic decline in February 2026, falling below 90 million ounces and hitting levels not seen in nearly five years. This drawdown is fueling concerns about a potential supply crunch and escalating price volatility as physical demand increasingly challenges the dominance of paper trading.
The Shrinking Silver Supply
As of February 20, 2026, total COMEX silver inventories stood at 366.25 million ounces, a nearly 31% decrease from the approximately 532 million ounces held in October 2025. The most concerning trend is the sharp reduction in registered silver – the metal readily available for delivery against futures contracts – which has slipped to 88,191,059.264 ounces. Eligible silver, which meets exchange specifications but isn’t immediately deliverable, also declined to 278,065,980.223 ounces.
This consistent decline since October 2025 suggests more physical silver is leaving vaults than entering them, widening the gap between outstanding paper contracts and the actual metal available to settle those contracts.
Registered vs. Eligible Silver: Understanding the Categories
COMEX categorizes silver into two key types: registered and eligible. Registered silver carries a warrant, guaranteeing its availability for delivery. Eligible silver meets the exchange’s quality standards but requires reclassification to become deliverable. Transfers between these categories are crucial; converting eligible to registered boosts deliverable supply, whereas the reverse reduces it.
Impact on the Market: Liquidity, Volatility, and Margin Hikes
The dwindling registered silver stocks are tightening near-term liquidity, potentially widening the difference between buying and selling prices (bid-ask spreads), and increasing price volatility. CME Group has already responded to the heightened volatility by raising margin requirements, which temporarily cooled prices due to forced selling by leveraged traders.
A Widening Disconnect: Physical Demand vs. Paper Positioning
Industry experts are observing a growing divergence between the fundamentals of the physical silver market and the positioning of paper traders. Harshal Dasani of INVasset PMS notes that silver is entering a “highly sensitive phase” marked by this disconnect. Combined inventories on the Shanghai Gold Exchange (SGE) and Shanghai Futures Exchange (SHFE) are estimated at around 700,000 kilograms, while COMEX registered silver stands near 88 million ounces against a March open interest of roughly 230 million ounces – a significant imbalance.
Several analysts point to substantial short positions held by major US banks as a factor suppressing prices, arguing that paper markets are temporarily distorting the true value of silver.
What’s Next? Potential for a Delivery Squeeze
With Chinese markets reopening, renewed physical buying could quickly amplify the existing supply pressures. Experts anticipate continued volatility in March, but suggest price dips may present buying opportunities rather than signaling a trend reversal. A potential “delivery squeeze” could occur if large institutions, like JP Morgan, issue significant delivery notices, forcing a scramble for physical bullion.
Vandana Bharti, Head of Commodity Research at SMC Global Securities, cautions that while lower registered stocks reduce the delivery cushion, COMEX inventories represent only a portion of global supply. Eligible metal can be reclassified, and additional supply could arrive from imports or over-the-counter markets.
Silver Price Outlook: Near-Term and Long-Term
Analysts predict the MCX silver price will trade in the range of ₹2,50,000 to ₹2,80,000 per kilogram in the near term. A break above $90 could trigger further price increases, supported by the structural deficits in the silver market. Elevated open interest and rising delivery demand are expected to exacerbate volatility.
FAQ: Silver Market Concerns
Q: What is “registered silver”?
A: Registered silver is silver held in CME Group-approved depositories with a warrant, making it immediately available for delivery against futures contracts.
Q: Why are silver inventories declining?
A: Declining inventories suggest increased physical demand and a potential supply shortage, as more silver is leaving vaults than entering them.
Q: What is a “delivery squeeze”?
A: A delivery squeeze occurs when a large number of traders demand physical delivery of silver, exceeding the available supply and potentially driving up prices.
Q: Is silver a good investment right now?
A: Experts suggest that the current market conditions present potential opportunities, but investors should consult with a financial advisor before making any decisions.
Did you know? Silver has both industrial and investment applications, making it unique among precious metals.
Pro Tip: Retain a close watch on COMEX registered silver inventories and open interest data to gauge the potential for market volatility.
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