Silver’s Warehouse Drain and Inflation Jolt Create a Fractured Market

COMEX silver inventories plunge 40% in six months, yet spot price languishes near $76 as hot inflation data delays rate cuts and solar manufacturers shift to copper alternatives.

Silver is being pulled in opposing directions with unusual force. Physical inventories at the COMEX have tumbled to roughly 315 million ounces, down from a peak of 531 million ounces last October — a drop of more than 40% in just over six months — yet the spot price remains pinned near $76, struggling to build any lasting momentum.

That divergence is the story of this market. On one side, deliverable metal is growing scarcer by the week. On the other, hot U.S. inflation data has slammed the door on near-term rate cuts, strengthening the dollar and lifting bond yields, which are toxic for an asset that pays no interest.

The price action tells the tale plainly. After closing at $77.55 on Friday, silver slid to around $75.91 by Monday, a modest 0.21% gain from the prior session but still below the psychologically important $76 handle. The weekly loss of 10.71% erased a chunk of the year’s earlier gains, leaving silver up roughly 7.31% since January.

Paper claims multiply as physical metal vanishes

The inventory drawdown is raising eyebrows well beyond the trading floor. Registered COMEX stocks have shed 95 million ounces in the first two months of the year alone, and the coverage ratio — the share of available metal backing open futures contracts — now stands at a thin 15.7%. With paper leverage at 6.4 times, there are more than six ounces of claims for every ounce of deliverable silver in the warehouse.

That structural tightness normally supports higher prices, but for now the macro picture is dominating. U.S. producer prices jumped in April at the fastest clip since 2022, while consumer inflation hit its highest since 2023. The energy shock tied to the Iran conflict and the continued closure of the Strait of Hormuz is feeding through to input costs, keeping the Federal Reserve’s stance firmly hawkish.

Deficit narrative intact, but demand shifts ahead

The fundamental backdrop remains supportive on paper. The Silver Institute expects a sixth consecutive annual deficit in 2026, pegged at around 46.3 million ounces — up from an estimated 40.3 million last year. Since 2021 the cumulative drawdown in above-ground stocks has reached nearly 762 million ounces.

Yet the demand picture is not without cracks. Solar manufacturers, which have been a major driver of silver consumption, are under severe cost pressure. Silver paste accounts for as much as 30% of a solar cell’s total cost, and with the metal trading at roughly $2.5 million per tonne versus copper’s $13,000, the incentive to substitute is strong. Longi plans to switch to copper-based metallization in mass production this year, while DK Electronic Materials is developing high-copper formulations. According to PV Magazine and Metals Focus, photovoltaic demand for silver could decline by around 19% in 2026.

Other industrial sectors are picking up some of the slack. Electric vehicles, data-centre infrastructure for artificial intelligence, and 5G networks all require high-conductivity materials where silver has few practical substitutes. Mine supply, meanwhile, is only creeping higher — an estimated 813 million ounces in 2025 and perhaps 820 million in 2026 — because roughly 70% of silver production is a byproduct of copper, gold and zinc mining.

Analyst forecasts split across a wide band

The range of price expectations for 2026 is unusually broad, reflecting the market’s current schizophrenia. Goldman Sachs sees silver averaging between $85 and $100; Citigroup’s bull case puts it at $110 in the second half. At the more conservative end, J.P. Morgan forecasts around $81, ING at $78, and the Reuters median of 30 analysts lands at $79.50.

The gold-silver ratio offers a longer-term lens. At roughly 59, it has recovered from a low of 43 but remains below the historical average of 65 to 75. Readings above 80 have historically flagged silver as undervalued relative to gold, though that threshold looks distant for now.

Technically, silver closed last week just above its 50-day moving average of $77.13, while the 100-day average sits well above at $82.73 — a clear sign the short-term trend has lost its upward thrust. Until U.S. inflation signals and the Fed’s next move become clearer, the macro headwinds are likely to keep the metal pinned in a nervous range, even as the physical market grows ever tighter beneath the surface.