Silver's Supply Squeeze Intensifies as COMEX Delivery Deadline Looms

Silver claws back above $72 amid COMEX delivery stress, China's sulfuric acid export ban, and structural deficits, with GDP data looming.

Silver clawed back above $72 on Thursday after touching a three-week low near $70.85 in Asian trading, but the real drama is unfolding in the futures market. Today marks the First Notice Day for the COMEX May contract, forcing holders of open positions to decide whether to close out, roll forward, or take physical delivery. The problem is stark: roughly 135 million ounces are tied up in open May contracts, while only 77 to 80 million ounces sit available for immediate delivery. That puts the coverage ratio at 13 to 14 percent — below the 15 percent stress threshold for six consecutive months.

The technical backdrop supports the bounce. The relative strength index had dipped to around 37, a level many traders consider oversold. Analysts describe the move as a corrective rebound, but the physical market tells a deeper story. A Bank of America study points to structural undersupply, with industrial demand outstripping constrained supply growth. Every dip below $71 has been met with buying interest from those betting on a longer-term squeeze.

China is tightening the screws on multiple fronts. Starting tomorrow, Beijing imposes an export ban on sulfuric acid — a move that sounds like a chemicals issue but hits silver directly. Roughly 70 percent of global silver production comes as a byproduct of copper, lead, and zinc mining. Restricting sulfuric acid supply indirectly throttles silver output. Chile, the world's largest copper producer, imports over a million tonnes of Chinese sulfuric acid annually, with a fifth of its copper output relying on acid-based leaching processes. This follows China's earlier moves: an export licensing requirement for silver introduced in January 2026, followed by record imports in March.

Geopolitical tensions add another layer. The closure of the Strait of Hormuz has disrupted about a third of global sulfur trade, while rising oil prices and stalled US-Iran negotiations fuel inflation expectations. A US official confirmed President Trump rejected Iran's latest proposal, dashing hopes for a quick resolution. Markets are now pricing in higher-for-longer interest rates, which pressures non-yielding assets like silver. The Bank of Japan held its policy rate steady this week, with the Federal Reserve and European Central Bank set to announce their decisions shortly.

The macro picture is a double-edged sword. All eyes are on the Bureau of Economic Analysis' first-quarter GDP estimate for 2026, due at 14:30 MEZ. The Atlanta Fed's GDPNow model points to annualized growth of just 1.2 percent — a reading that would revive stagflation fears. Historically, that environment favors physical precious metals, even as the current rate backdrop works against them.

The supply deficit is not a new phenomenon. The Silver Institute reports a cumulative drawdown of 762 million ounces over five consecutive years of deficit. For 2026, it projects another shortfall of 46.3 million ounces — the sixth year running. One data point captures the severity: in January 2026, 33 million ounces vanished from registered COMEX inventory in a single week, representing 26 percent of the deliverable pool.

Technically, the resistance zone between $74.70 and $76.40 looms large. On the downside, $70 is the critical floor — a break below that could trigger selling toward $65. Falling above-ground inventories make the market vulnerable to sudden volatility spikes in either direction. For now, the tug-of-war between physical scarcity and macro headwinds keeps silver in a precarious balance.