Silver Presents the Magical Metal Mystery

By all accounts, silver has been in a structural deficit, with global demand exceeding global production, for over four years now:

Silver saw its fourth year of a major deficit in 2024 as a slight 2% rise in supply and 3% dip in demand still meant a shortfall of around 150Moz (4,600t).

Above ground supply has made up the difference with inventory draining from major vaults in the COMEX and LBMA systems since early 2020.

COMEX silver vault inventory:

LBMA silver vault inventory:

Tariffs, EFP Spreads and Monkey Wrenches​

In late November, 2024, President Trump announced 25% blanket tariffs were to be imposed on goods from Canada and Mexico, and 10% (additional) on goods from China. There was no clarification on whether precious metals (or anything else) would be exempt from the tariffs. Additionally, President Trump signalled that further tariffs were likely for Europe and other corners of the globe.

The "EFP spread" - the difference between COMEX futures price and London spot, which had been near zero or negative, began to rise. As it rose, COMEX swap dealers (bullion banks) that were net short and hedging with London/LBMA silver began to take delivery of the metal and have it shipped to COMEX warehouses.

Throughout December, January and early February, COMEX shorts went on a tear importing silver from London/LBMA and anywhere else they could find eligible silver bars (COMEX only accepts silver in very specific formats):

• USA based refineries that produce COMEX bars were reportedly 3 months backlogged working to satisfy COMEX bar demand
• Lease rates blew out as no one wanted to part with silver in hand
• Borrowing fees on SLV shares also blew out as speculation rose that swap dealers were redeeming shares for SLV metal (warehoused in LBMA vaults)
• PSLV appears to have been subject to market action designed to prevent it's premium to NAV from rising in order to limit Sprott from issuing new trust units and subsequently buying more London Good Delivery silver (to be warehoused in Canada, not London)

I touched on these issues previously in my Silver Squeeze Comprehensive Thesis, but I reiterate the points to provide context for what follows.

Opacity - 100%​

CME group publishes a silver stock report every working day that discloses the inventory changes amongst all of the member vaults in the COMEX system (for the previous working day). From this data we can see that COMEX vaults were seeing inflows of silver, on average, about 4M troy ounces (about 124 metric tons) per day.

Unfortunately, the LBMA is not so transparent with their reporting. They publish a single, total inventory number once a month. They have also been caught misreporting their vault inventory before (to the tune of 3,000 tons - not a small error!).

April Fool's joke:


In February and March, the LBMA reported inventories reflecting decreasing outflows of silver while the COMEX continued to report strong and consistent daily inflows.

The 2,000 Metric Ton Mystery​

Per the Silver Institute's numbers (widely regarded to understate global demand), the average global silver production (including recycling) across 2024 was ~84.6mtoz per month while the demand was ~97mtoz per month. They further estimate that the production/demand deficit will increase in 2025. Global vaults should be draining and the draining should intensify in 2025.

However, the vaulted inventory of the COMEX, LBMA and SFE/SGE (China) supposedly managed to add 64.7mtoz (over 2,000 metric tons) of Good Delivery format silver bars to their vaults across February and March per their inventory reports. It's not like refineries/mints suddenly developed the ability to triple their production of COMEX standard silver bars, so where did the new COMEX silver come from in February and March? I think someone is lying about their vaulted inventory and I'm looking at you LBMA.