Silver’s Physical Divergence: London ETF Outflows, COMEX Drawdowns, and Persistent Chinese Premiums
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Silver markets are currently displaying a divergence between falling international prices and continued physical demand signals in Asia. Over the latest reporting week, the global spot price of silver declined 3.93% to $80.6 per ounce. At the same time, structural indicators across vault inventories, ETF flows, and regional pricing premiums reveal a tightening supply environment rather than a broad demand retreat.
In London, silver held in ETFs declined by 322 metric tons week-on-week to 20,615 tons, a 1.54% reduction. This outflow coincided with a 5.3% increase in the London “free float” — silver not held by ETFs — which rose to approximately 207 million ounces. Meanwhile, COMEX vault inventories continue to trend lower, with registered stocks standing at roughly 79 million ounces (2,457 tons) and declining by 2.6 million ounces (81 tons) in a single day.
In China, domestic pricing remains significantly above international benchmarks. Silver has been trading at $97.7 to $98.5 per ounce in Shanghai compared with roughly $85.6 to $85.8 per ounce in London, maintaining a premium of approximately 14.1% to 14.9%. At the same time, combined vault stocks across the Shanghai Futures Exchange (SHFE) and the Shanghai Gold Exchange (SGE) remain near decade-low levels, totaling approximately 698.5 tons, or 22.5 million ounces.
These figures describe a market where Western investment flows are reducing ETF holdings while Asian physical demand continues to support elevated regional premiums.
London remains the central storage hub for wholesale silver trading. During the latest reporting week, silver held in London ETFs declined by 322 metric tons, bringing total ETF holdings to approximately 20,615 tons. The reduction represents a 1.54% week-on-week decline.
As ETF holdings declined, the estimated “free float” of silver in London vaults increased to roughly 207 million ounces, a 5.3% weekly rise. Free float refers to the quantity of silver stored in vaults that is not tied to ETF custody and therefore remains accessible for other market participants.
This increase in free float reflects a mechanical effect of ETF redemptions. When Authorized Participants redeem ETF shares, the corresponding silver bars are released from ETF custody back into the broader vault inventory. The metal remains physically present in London but becomes available for other uses within the bullion market.
Such redemptions are often used by Authorized Participants to source physical bars for delivery obligations or industrial demand.
COMEX vault inventories remain under pressure despite fluctuations in global spot prices. Registered silver stocks — the category eligible for delivery against futures contracts — currently stand at approximately 79 million ounces, equivalent to about 2,457 metric tons.
During the most recent session, COMEX registered stocks declined by 2.6 million ounces, or approximately 81 tons. Over the course of the week, inventories declined by roughly 142 tons.
These figures illustrate the continued movement of silver out of COMEX vaults. While the rate of depletion varies week-to-week, the ongoing decline in registered inventory indicates that physical silver is leaving exchange vault systems even as prices correct.
Physical silver inventories in China continue to remain compressed despite occasional inflows. Combined vault stocks across the Shanghai Futures Exchange and the Shanghai Gold Exchange currently stand at approximately 698.5 tons, equivalent to around 22.5 million ounces.
SHFE inventories recently recorded a notable increase, including a daily inflow of 16.6 tons and a weekly build of 70.6 tons. Earlier reporting also recorded a single-day inflow of 58.12 tons, the largest daily increase observed in roughly two and a half months.
Even with these inflows, inventory levels remain close to long-term structural lows. The current combined total remains significantly lower than historical inventory levels observed during earlier periods of exchange activity.
While prices declined in international markets, silver in China continues to trade at significant premiums relative to LBMA benchmarks. Recent pricing shows silver trading between $97.7 and $98.52 per ounce in Shanghai, compared with approximately $85.64 to $85.78 per ounce in London.
This pricing differential corresponds to premiums ranging from approximately 14.1% to 14.9%. Such premiums indicate that domestic buyers in China are paying substantially above international benchmark prices to secure physical supply.
The persistence of these premiums during a global price correction suggests that local demand remains firm despite broader market volatility.
Activity within China’s futures market shows a contrasting dynamic between silver and gold. Open interest in SHFE silver futures remains near a 10-year low, indicating reduced leveraged participation. Over the same period, gold open interest on the SHFE increased approximately 10% week-on-week.
This divergence reflects a shift in derivatives activity toward gold while silver futures participation remains subdued.
Within the futures curve, silver contracts continue to trade in an inverted structure. The June 2026 SHFE silver contract recently closed 4.2% lower at approximately $94.45 per ounce.
The relationship between SGE spot pricing and SHFE futures pricing is tightening. The SGE Ag(T+D) spot price traded around CNY 20,887 per kilogram, equivalent to $94.22 per ounce, while the SHFE June 2026 contract traded near CNY 20,923 per kilogram, or $94.39 per ounce.
The resulting spread between the two markets is approximately $0.17 per ounce, or about 0.19%. This narrow differential suggests the spread between spot and futures pricing is approaching backwardation conditions after several weeks of contango.
Closed-end precious metals trusts currently trade at discounts relative to their underlying metal value. As of March 13, the Sprott Physical Gold Trust (PHYS) traded at a 2.3% discount to net asset value. The Sprott Physical Silver Trust (PSLV) traded at a 5.3% discount, while the Central Fund of Canada (CEF) traded at roughly an 8% discount.
Unlike exchange-traded funds, these closed-end trusts do not create or redeem shares daily to match investor demand. As a result, their market prices can deviate from the value of the metal they hold. Discounts therefore reflect investor sentiment and liquidity conditions within the secondary market rather than changes in underlying metal supply.
For bullion dealers, the key metrics remain vault inventories and regional pricing spreads. COMEX registered stocks currently stand near 79 million ounces, while combined Shanghai vault inventories remain around 698.5 tons. Monitoring these levels will indicate whether the recent inventory compression stabilizes or continues.
For conservative investors, the divergence between ETF outflows and persistent Chinese premiums is significant. A 322-ton reduction in London ETF holdings combined with premiums of approximately 14% in Shanghai indicates that physical demand dynamics differ sharply across regions.
For traders, futures spreads and open interest trends provide the clearest signals. The narrowing spread between SGE spot and SHFE futures prices, currently near $0.17 per ounce, suggests the market structure is approaching backwardation conditions. At the same time, the continued contraction of silver open interest contrasts with the 10% weekly increase in SHFE gold open interest.
Across London, COMEX, and Shanghai, the measurable figures describe a silver market where inventories remain constrained, premiums remain elevated in Asia, and derivatives participation remains uneven. These data points define the current structure of the global silver market.
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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