Silver's Supply Gap Faces a November Audit While the Fed Tightens the Screws

Silver investors are being pulled in two directions at once. On one side sits a forecast of a global supply shortfall that has underpinned the metal's bullish case since spring. On the other, a hawkish turn in US rate expectations and cautious physical buyers are capping any rebound. The two forces are set to collide around a scheduled mid-November interim review of the silver market outlook, which will test whether the deficit thesis still holds.

The Deficit Forecast Under Scrutiny

Metals Focus and the Silver Institute projected in April a global silver market deficit of 46.3 million ounces for 2026, wider than the prior year's shortfall of 40.3 million ounces. The forecast puts supply at 1,066.4 million ounces against demand of 1,112.6 million ounces. That gap is the core of the fundamental argument for silver — but it only works if demand genuinely outpaces available supply. The upcoming interim review gives the market a concrete moment to re-examine those assumptions, especially with coin sales weakening and inventory flows painting a mixed picture.

Inventories Tell a Divided Story

Recent stock reports show diverging trends across trading venues, so the read on tightness depends heavily on which vaults and categories you watch. Silver holdings on the SHFE rose 8.4 tonnes in the week to November 5, according to media reports, while SGE stocks fell 63.77 tonnes in the period through October 30. On COMEX, the shift has been between categories rather than a simple drawdown: since October 27, eligible silver stocks have dropped by nearly six million ounces, while registered inventories climbed by roughly four million ounces. Those opposing moves in China and the US warrant close attention when judging how tight the market really is.

Coin Demand Loses Steam

On the demand side, the Perth Mint offered a note of caution. Its silver sales fell 36% in October from September to 388,536 ounces — an awkward data point against the expectation of a larger global deficit. The pullback in retail coin purchases suggests that not every corner of demand is running hot.

Rate Path Extends Past December

Monetary policy is adding its own headwind. The debate now stretches beyond the next meeting, with a larger December step still not treated as the base case. That means the risk for silver runs past the upcoming gathering: even a run of smaller hikes could prolong the pressure if price pressures keep forcing further tightening.

Fed Governor Christopher Waller backs a December rate increase and, with inflation staying elevated, considers 50 basis points worth debating. Dallas Fed President Lorie Logan sees at least two more 25-basis-point hikes as necessary and reckons a faster pace is possible. The trigger for the sharpened debate was yesterday's US consumer price report: the headline index rose 0.4% month-on-month in October, above the 0.3% expected. Core inflation, excluding food and energy, climbed 0.3% for a third straight month against a 0.2% forecast — a sticky reading that strengthens the case for further tightening. Higher Treasury yields and a firmer dollar weighed on precious metals in response.

Spot Buyers Keep Their Powder Dry

Trading in the Chinese silver spot market was subdued today, with buyers covering only immediate needs as the spot basis narrowed. That restraint fits the neutral stance from Huatai Futures, which expects a near-term sideways move and points to firmer rate expectations and a stronger dollar. Physical demand, in other words, is offering little counterweight to the pressure from rates and currency. A broader recovery would need either fresh buying or relief from monetary policy; while procurement stays need-based, any improvement in prices leans more on rate worries easing. Yesterday's close of USD 51.49 per troy ounce, a daily change of -3.6%, underlined the strain from the latest repricing of US rate prospects.

What to Watch Into December

The next fixed date is the Fed meeting on December 8–9. Until then, Huatai's neutral positioning argues for caution as long as inflation supports further hikes and physical buyers stick to their immediate requirements. For a fundamentals-driven extension of the recovery, all eyes fall on the interim review: if it confirms the expected shortfall, the scarcity argument gains backing. Weaker coin sales and restrictive rate signals, however, remain weighty counterpoints.