Silver’s Violent Repricing: Shanghai Restocking, Curve Flip Into Contango, and Speculative Positioning Rebuilds
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Silver markets are moving through a rapid structural transition marked by aggressive inventory rebuilding in China, widening futures spreads, and renewed speculative participation in options markets. After months of physical tightness and backwardation, the Shanghai Futures Exchange (SHFE) silver curve has now flipped decisively into contango, signaling a measurable shift in short-term supply conditions.
The scale of inventory rebuilding in China has been substantial. SHFE silver inventories have recorded a cumulative five-week inflow of 473.64 metric tons, placing the current movement in the 98.38th percentile of all inventory expansions since 2015. Combined inventories across SHFE and the Shanghai Gold Exchange (SGE) now stand at approximately 1,416 tons (45.5 million ounces), up nearly 2.5 times from the March low of 602 tons.
At the same time, pricing remains elevated. Silver in China continues to trade around $90 per ounce, maintaining a premium of approximately 13% over LBMA pricing. Futures pricing has also strengthened, with SHFE silver closing near $90.7 per ounce on a COMEX-equivalent basis, approaching the key psychological level of 20,000 CNY/kg.
Positioning data shows increasing speculative activity. Call options at the 21,000, 22,000, and 25,000 CNY strikes are attracting new interest, while SLV options markets in the U.S. show rising open interest and implied volatility at higher strikes. Meanwhile, Sprott Physical Silver Trust (PSLV) added approximately 17.4 tons of silver through new unit issuance over two days.
These figures describe a market transitioning from acute physical scarcity toward active replenishment, while speculative participation begins rebuilding alongside elevated regional premiums.
The Shanghai Futures Exchange is currently experiencing one of its fastest inventory expansions in nearly a decade. Over the last five weeks, cumulative inflows have reached approximately 473.64 tons.
This rate of accumulation places the current inventory build in the 98.38th percentile of all readings since 2015, making it one of the largest restocking phases observed during that period.
Combined SHFE and SGE inventories have now increased to approximately 1,416 tons, equivalent to 45.5 million ounces of silver. This compares with the March low of approximately 602 tons, indicating that inventories have more than doubled within a short period.
Despite the increase, inventories remain substantially below historical highs. Current levels are still far below the more than 7,000 tons recorded during the 2021 peak.
One of the most significant structural changes in the silver market has occurred within the SHFE forward curve. After weeks of persistent backwardation, the curve has now shifted into contango.
A contango structure indicates that futures prices are trading above spot prices, typically reflecting easing immediate supply pressure and the reintroduction of carrying costs into pricing.
At the same time, Exchange for Physical (EFP) spreads continue widening, indicating that the cost of converting futures exposure into physical metal remains elevated.
The combination of inventory rebuilding and contango suggests that short-term supply conditions in China have improved relative to the extreme tightness observed earlier in the year.
Despite the rapid rebuilding in Shanghai, global silver inventories remain heavily concentrated in Western storage systems.
Total global silver inventory currently stands at approximately 38,596 metric tons. Of this total:
LBMA vault holdings for April 2026 were reported at approximately 27,454 tons, down 0.1% month-on-month.
These figures show that although Chinese inventories have increased rapidly, the majority of global silver supply remains stored within London and New York systems.
Silver pricing in China continues to hold at a significant premium relative to international benchmarks. Recent pricing shows silver trading near $90.1 to $90.7 per ounce in China versus approximately $79 to $80 per ounce in London.
This corresponds to premiums of approximately 13% over LBMA pricing.
The persistence of double-digit premiums despite the substantial increase in Chinese inventories indicates that local demand continues to absorb incoming supply. Inventory rebuilding has therefore reduced immediate scarcity without fully eliminating regional pricing pressure.
Options activity across both SHFE and U.S. markets indicates a return of speculative participation.
On SHFE, traders are rolling positions upward, with call options at the 21,000, 22,000, and 25,000 CNY strikes gaining traction. The 25,000 strike corresponds to approximately $114 per ounce, representing positioning for substantially higher price outcomes.
In the U.S., SLV options positioning also reflects increased activity. Open interest has risen sharply at the $70, $75, and $90 strikes, with the $75 level emerging as a significant “call wall.”
Implied volatility has increased alongside price over the last six sessions:
The rise in both price and implied volatility indicates that options demand is increasing faster than realized price movement.
Physical investment demand remains active within trust structures. Over a two-day period, PSLV created approximately 1.65 million new units, corresponding to roughly 560,000 ounces, or approximately 17.4 tons of silver.
Unlike synthetic ETF exposure, PSLV unit creation typically requires additional physical silver backing, meaning new units represent incremental demand for metal.
The current silver structure reflects a transition away from acute depletion but not a return to historical balance. Inventories in China have increased sharply, the futures curve has shifted into contango, and EFP spreads remain elevated.
At the same time, premiums remain above 13%, global inventories remain concentrated in Western vaults, and speculative participation is rebuilding from previously depressed levels.
These figures indicate that supply conditions have improved relative to the March lows, but demand remains sufficient to sustain elevated pricing and active positioning.
For bullion dealers, the key development is the speed of Chinese restocking. A five-week inflow of nearly 474 tons into SHFE vaults represents one of the fastest replenishment phases since 2015. However, premiums remaining above 13% indicate that the market has not fully normalized despite the increase in available supply.
For conservative investors, the current structure reflects a market where physical demand remains intact even as inventories recover. PSLV unit creation, persistent Chinese premiums, and stable global inventory levels suggest that silver continues to attract allocation despite recent volatility.
For traders, the current setup presents an important inflection point. In the near term, the shift from backwardation into contango and the rapid rise in inventories suggest that the market may consolidate after the aggressive rally earlier in the year. The CNY 20,000/kg level — roughly equivalent to the high-$80s to low-$90s per ounce — remains the key near-term battleground. Sustained acceptance above that level would likely trigger further upside momentum, especially with call positioning already extending toward 21,000–25,000 strikes.
Over the longer term, the broader structure still appears constructive. Even after aggressive restocking, combined Shanghai inventories remain dramatically below 2021 levels, while premiums remain elevated and speculative participation is only beginning to rebuild. If inventories stabilize below historical norms and physical demand continues absorbing supply, silver prices moving back toward and potentially above the $100 per ounce level become increasingly plausible over time. Conversely, a sustained collapse in premiums alongside continued inventory growth would indicate that supply conditions are finally catching up with demand, reducing the probability of another squeeze phase.
Across inventories, futures structure, and options positioning, the figures describe a silver market shifting from scarcity panic toward controlled replenishment, while retaining the conditions for continued long-term volatility and upward pressure.
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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