Silver's Split Signal: Refinery Backlogs Deepen Even as COMEX Vaults Fill Up

Silver slipped 1.8% to $60.76/oz, down 12% this year, as registered COMEX stock fell and refiners ran three to four months behind.

Silver traders are navigating a market that keeps pulling in two directions at once. On Wednesday, the metal slipped 1.8% to $60.76 an ounce, extending a rough stretch that has left it 12% lower since the start of the year. Yet the same week brought a modest countermove: COMEX's front-month contract added 1.3% on Tuesday to $61.84 an ounce, a reminder that buyers are still willing to step in at these levels.

What makes the current setup unusual is the disconnect between what's happening on the screen and what's happening in the vaults and refineries that actually move metal.

Vault totals rise, but deliverable metal shrinks

Figures compiled by Money Metals Exchange show COMEX inventories in New York grew by roughly 2.5 million ounces in the week spanning September 18 to 25, reaching 332.6 million ounces as of September 25. The headline number looks reassuring. The composition tells a different story.

Every ounce of that increase landed in the "eligible" category — metal that meets exchange standards but isn't registered for settling futures contracts. Registered stock, the material that can be delivered against a maturing contract, fell by 1.0 million ounces over the same window. Eligible holdings, meanwhile, climbed 3.5 million ounces. In other words, the exchange has more silver sitting in its warehouses than a week ago, but less of it is actually available to fulfill obligations.

Refiners are running three to four months behind

Upstream from the vaults, processing capacity is stretched thin. Josh Phair, chief executive of Scottsdale Mint, said in a media interview that silver refineries are running three to four months behind schedule, with the backlog varying according to the feedstock being processed. Phair was careful to note that refined, finished metal remains adequately available within the United States for now — the constraint is time, not supply.

That distinction matters. A refining queue doesn't mean the metal has vanished; it means the pipeline from raw material to deliverable bar has lengthened considerably.

Rates and the dollar keep the pressure on

Macro forces have done most of the damage to prices lately. Rising US Treasury yields and a firmer dollar have raised the opportunity cost of holding a metal that pays no interest, according to media reports. Geopolitical anxiety added to the mix roughly three weeks ago, when tensions around the Strait of Hormuz stirred fresh concerns.

Currency and bond markets have been whipsawed by uneven economic data, leaving rate expectations jumpy. Attention now turns to Friday's US employment report, which investors hope will clarify the Federal Reserve's path on interest rates.

Some of that anxiety has already eased. New York Fed President John Williams signaled the central bank sees no need to rush further rate moves, taking some of the edge off short-term rate fears in futures markets. US consumer price data also came in softer than expected, even as hawkish commentary elsewhere kept sentiment in check.

UBS stays bullish, but urges patience

Against this choppy backdrop, UBS is looking past the near-term noise. Strategist Dominic Schnider reaffirmed the Swiss bank's constructive view on Tuesday, forecasting silver at $70 an ounce by December 2026. The bank then sees $75 in both March and June 2027, with $80 an ounce penciled in for September 2027.

Schnider pointed to silver's tight link with gold, industrial demand tied to electrification investment, and longer-term risks facing the US dollar as the pillars supporting the outlook. His advice to investors: use pullbacks to build positions gradually rather than chasing short-lived rallies.

For now, the market offers little momentum to chase. Silver is trading 15% below its 200-day moving average — a gap that captures both the weight of the recent decline and the distance the metal would need to cover to satisfy UBS's targets.