Silver’s Mid-February Paradox: China Pays Up, Paper Deleverages, and COMEX Metal Keeps Disappearing
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Silver is doing that thing it only does when a market is trying to reconcile two truths at once. On one hand, the physical signals out of China are loud enough to be measured in records: January 2026 silver withdrawals through the Shanghai Gold Exchange hit 321.7 metric tons, a new high that’s up 287% year-over-year, and more than 3× the 8-year average of 96.56 tons. On the other hand, the paper layer is visibly cooling: silver open interest on the Shanghai Futures Exchange has collapsed to a 10-year low of 505k contracts (758 tons), down 23.2% month-to-date into the Lunar New Year window. Meanwhile, the West is watching metal vanish at pace: COMEX silver vaults have seen ~73.4 million ounces (2,283 tons) withdrawn in 29 days, including an accelerating burst of 11.2 to 14.0 million ounces (350 to 436 tons) since Monday as March delivery approaches. With that backdrop, it makes sense that premiums are “roaring” rather than drifting: the Shanghai PM benchmark has been marked at +10.2% (+$7.85/oz) above LBMA, with another read showing +9.45% (+$7.25/oz) after a COMEX sell-off.
What makes this week worth writing down is that none of these numbers is subtle. They are big enough to define the narrative without needing decoration.
The Shanghai tape has a named character this week: CITIC Futures, flagged as the largest short on SHFE silver, short 14.8k. What tightens the story is not just the size of the short—it’s the timing and the rate of change. Their net short increased 22.6% on Friday, explicitly noted as happening ahead of CNY. That’s a clean, tradable kind of information because it gives you a measurable behavioral shift: a dominant short leaning further in, into a calendar period where liquidity can thin and where price discovery often becomes less forgiving.
If you’re trying to understand why intraday swings can feel outsized even when some “macro” gauge looks calm, the simplest answer is often this: a large position got larger at a time when fewer participants want to hold risk.
If you only read one physical line item, it’s this one: January 2026 SGE silver withdrawals at 321.7 tons, a record, +287% YoY, and >3× the 8-year average (96.56 tons). That’s the kind of data point that doesn’t need interpretation—withdrawals are what they are, and the comparisons are arithmetic.
That same 321.7-ton figure shows up again as the headline for year-to-date momentum: by mid-February, 321.7 tons have already left the vaults, and the run-rate is framed as fast enough to challenge 2021 if it persists. Layer on 2025’s context—withdrawals rebounded to 2,419.8 tons after a three-year dip—and you get a two-step sequence in plain sight: 2025 re-accelerated; early 2026 is not easing off.
The price tape is capturing that urgency in the most mechanical way possible: China is repeatedly marking silver well above the London benchmark. You can see it in the reference pricing snapshot around Shanghai time: Ag(t+d) at $83.95/oz while LBMA is $76.65/oz, the same basis story expressed as two spot quotes.
The market is giving you the premium in both percent and dollars, which is helpful because it removes ambiguity. One close had Shanghai PM fixing implying +13.9% (+$10.1/oz) earlier in this broader cycle, and in the current set of notes the premium is described as “surging ahead of Lunar New Year,” with silver trading +10.2% (+$7.85/oz) above LBMA. Another morning print, explicitly “after COMEX sell-off,” shows premiums widening to +9.45% (+$7.25/oz) with a paired quote: $83.95 vs $76.65.
Those three readings don’t conflict—they give you a range, a direction, and a time stamp. When you see premiums quoted in dollars per ounce, not just percent, you can immediately understand the economic “distance” between the two markets. $7–$8 per ounce is not a token spread; it’s a real wedge that changes sourcing decisions and can reshape where dealers try to pull supply from.
The weekly vault ledger in China is unusually clean this week, because it gives you both venues and the combined total. The combined SHFE + SGE stock stands at 804 tons (25.9 million ounces). Within that total, the SHFE side is 353 tons, and the SGE side is 450.5 tons after a 43-ton drop in that venue.
You also have a more granular SHFE breakdown that pins the same reality to daily movement: current SHFE inventory is 353.56 tons, with +3.93 tons day-over-day and +3.66 tons week-over-week, described as “modest inflows” that look small relative to the aggressive January outflows. Those numbers are valuable because they prevent “restocking” from being misunderstood as a trend reversal. A +3.66-ton weekly lift is mathematically tiny against the kind of weekly drains that are being reported elsewhere in the chain.
One of the most striking figures in the entire set is the SHFE open interest reading: 505k contracts (758 tons), a 10-year low, down 23.2% month-to-date heading into Lunar New Year. The notes also tie the move to conditions that would mechanically cause risk reduction: “a wild month of record volatility and hiked margin requirements,” followed by “the great deleveraging.”
When open interest is collapsing by 23.2% MTD, you don’t need to guess that participants are reducing exposure—you can see it directly in the contract count. That’s what makes the market feel odd: you can have an environment where physical urgency is expressed via double-digit premiums, while paper leverage is being actively removed at the same time.
On Shanghai, the curve is described as “deeply backwarded,” and the spreads are stated in both local units and approximate dollar equivalents. For SHFE silver, the futures spreads include Apr’26–Aug’26 at −¥1,095/kg (≈−$4.90/oz) and Apr’26–Dec’26 at −¥1,372/kg (≈−$6.15/oz). Those are big numbers in curve terms because they explicitly price nearer delivery above further delivery by multiple dollars per ounce.
On COMEX, the note is the opposite directional signal: “EFP spreads have been widening” while “the forward curve has shifted out of backwardation and back into contango,” and separately that backwardation has been deepening with May’26 flipping into backwardation at −$0.001/oz below spot. The important part here is the sign flips: when you see language that includes both “shifted into contango” and “May’26 flipped into backwardation,” you’re not being asked to choose a narrative—you’re being told the structure is unstable across points on the curve, and that stability is not guaranteed from one session to the next.
The COMEX vault story has two numbers that matter because they describe speed. Over 29 days, withdrawals total ~73.4 million ounces (2,283 tons). In the most recent burst, the market is described as losing 11.2 to 14.0 million ounces (350 to 436 tons) since Monday, framed as “physical drainage accelerating as the March delivery cycle approaches.”
You also have a delivery-relevant sub-stat that tightens the story further: Registered stocks are down 27% YTD to 93 million ounces in one note, and elsewhere Registered inventories plunged to a one-year low of 103.5 million ounces (−18.5% YTD). Even without reconciling those into a single unified line, the direction and the magnitude are consistent: Registered is being described as materially lower year-to-date, in both percent and absolute terms, and the market is explicitly calling it out as part of the drain narrative.
When a market starts talking in “millions of ounces since Monday,” it’s telling you that the change rate has become tradable on its own.
Price action in the notes is not presented as a single “close,” which is useful because it shows how different venues experienced the same day. One close is Ag(t+d) at $89.2/oz (−3.3%). Another session shows SGE Ag(t+d) at $81.55/oz (−11.4%). Those are not small moves; they fit the “volatility storm” framing and match the risk-off description tied to Feb 13.
And the risk-off snapshot itself is delivered in two measurable indicators: silver was 48.1% above its 200-day moving average, while the RSI was 36.7 after the liquidation. Those two numbers together are the kind of combination traders watch because they often don’t coexist for long: a market can be far above its long-term mean and still have a depressed RSI if the drawdown was violent enough.
The options commentary is unusually specific about where the excitement had been and where it’s gone. The “fever” around 30,000+ CNY/kg (~$135/oz) has been “postponed,” and traders who once bet on 38,700 CNY/kg (~$174/oz) are described as “fleeing” after a ceiling. The distributional clue is presented as a visual summary: above 26,000, “the red bars dominate,” implying that the high-strike enthusiasm has thinned.
The same paragraph gives you the other side of the ladder without forcing you to invent it: “as we move down the price ladder,” the tone shifts toward “preparation,” with strikes clustered between 21,000 and 25,000. That is a range, not a prediction—and it’s expressed in the only way that matters for options positioning: strike levels, not feelings.
For desks, the week is best summarized as a market with measurable stress in three places at once: a dominant SHFE short (CITIC) at 14.8k expanding its net short +22.6% into CNY, a paper deleveraging with SHFE open interest at a 10-year low (505k contracts / 758 tons, −23.2% MTD), and a physical withdrawal pace on COMEX that is being counted in 11–14 million ounces since Monday and 73.4 million ounces in 29 days. For fabricators, the operational reality is the basis: silver trading +10.2% (+$7.85/oz) over LBMA (and +9.45% (+$7.25/oz) after a sell-off) while combined China vaults stand at 804 tons (25.9m oz) with SHFE ~353 tons and SGE 450.5 tons; those figures define replacement cost and availability far more than headlines do. For conservative allocators, the tape argues for discipline rather than bravado: the market can drop 34% in seven sessions and still be +8.2% YTD, Shanghai can print $81.55 (−11.4%) on one day and still hold double-digit premiums versus London, and yet the “paper” layer can be shrinking at −23.2% MTD—a combination that rewards sizing, patience, and entry planning more than prediction.
Hugo Pascal’s observation about the AU9999 contract hitting a 10-week volume high underscores the increasing significance of physical gold trading on the Shanghai Gold Exchange. This trend not only highlights robust domestic demand in China but also reflects broader shifts in the global gold market toward physical-backed assets.
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