Silver’s Global Inventory Compression: Vault Declines, Record Chinese Withdrawals, and Premiums Reaching 14%
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Silver markets are currently defined by measurable inventory compression across the world’s three major exchange systems — COMEX, the Shanghai Gold Exchange (SGE), and the Shanghai Futures Exchange (SHFE). Since October 2025, reported silver inventories across these venues have declined sharply: COMEX vaults have fallen from 530 million ounces to roughly 351.3 million ounces (–34%), SGE inventories have declined from 39 million ounces to 14.3 million ounces (–64%), and SHFE stocks have dropped from 36 million ounces to approximately 8.2 million ounces (–77%).
The tightening continues on a weekly basis. COMEX vaults recorded their ninth consecutive week of net inventory declines, with a net change of –8,419,479 ounces (–261.88 tons) during the latest reporting week. On Thursday alone, inventories fell 2.2 million ounces (68.5 tons), bringing total COMEX silver stocks to approximately 349 million ounces.
At the same time, London’s silver supply dynamics show a similar contraction in accessible metal. Total silver held in London declined 2.4% month-on-month to 27,065 tons, while the estimated “free float” — silver not held by ETFs — dropped another 6.2% week-on-week to 197 million ounces.
Meanwhile, China’s physical market continues to price silver at significant premiums relative to international benchmarks. The Shanghai Gold Exchange closed domestic silver at $95.6 per ounce, compared with approximately $84 on LBMA pricing, representing a premium of $11.9 per ounce or +14.15%.
Across these exchanges, declining inventories, widening premiums, and tightening spreads between futures and spot markets describe a silver market experiencing sustained physical demand pressure rather than isolated price volatility.
The COMEX silver vault system has now recorded nine consecutive weeks of net inventory reductions. In the latest weekly report, total vault stocks declined by 8,419,479 ounces, equivalent to 261.88 metric tons.
Within that weekly total, Thursday alone accounted for a 2.2 million ounce decline (68.5 tons), bringing total COMEX inventory down to approximately 349 million ounces. While the pace of weekly withdrawals fluctuates, the uninterrupted nine-week trend illustrates persistent inventory contraction rather than episodic movements.
The longer-term context reinforces the scale of the shift. Since October 2025, COMEX silver inventories have declined from approximately 530 million ounces to around 351.3 million ounces. This represents a reduction of roughly 178.7 million ounces, or approximately 34% of total inventory.
Measured in physical terms, that drawdown corresponds to more than 5,500 metric tons of silver leaving the COMEX vault system over the period.
London’s silver market reflects a slightly different structure. Total silver held in London vaults declined 2.4% month-on-month to 27,065 metric tons. However, the more important metric is the “free float,” which represents silver not held within ETF structures.
That free float declined for the second consecutive week, falling 6.2% week-on-week to approximately 197 million ounces.
The distinction between total inventory and free float is operationally significant. Silver held within physically backed ETFs remains stored in vaults but is not typically available for trading or industrial supply. As ETF inflows increase, the portion of silver available for other market participants shrinks.
In practical terms, this means headline vault totals may remain relatively stable while the amount of metal accessible to the broader market continues to contract.
Shanghai’s silver inventory data provides the tightest physical signal among the major exchanges. Silver stocks on the Shanghai Futures Exchange have fallen to approximately 255.95 metric tons, the lowest level recorded since March 2015.
Recent movements illustrate the speed of the contraction. Inventories declined by 16.77 tons in a single day and by 50.6 tons over the course of the week. Earlier reporting also recorded SHFE inventories at 272.72 tons after a 34-ton weekly decline.
When combined with the Shanghai Gold Exchange vault system, total silver stocks across the two Shanghai exchanges now stand at approximately 718 tons, equivalent to 23.1 million ounces.
This level represents a dramatic reduction compared with historical inventory levels in China’s exchange network.
While inventories decline on the futures exchange, the Shanghai Gold Exchange continues to record strong physical withdrawals. In February alone, silver withdrawals from the SGE reached 115.2 metric tons.
The figure is nearly double the eight-year seasonal average of 62.67 tons for the same month. It also represents the second-highest February withdrawal level recorded in nearly a decade.
The cumulative withdrawal volume for January and February 2026 reached 436.8 metric tons. That combined figure is a record high for that period and more than double the withdrawals recorded during the same two months in the previous year.
These withdrawal statistics quantify demand rather than speculation. Withdrawals from the SGE represent physical metal leaving exchange vaults for fabrication, industrial use, or private ownership.
The tight physical conditions in China are also visible in the pricing spread between domestic and international markets. At the end of the week, silver on the Shanghai Gold Exchange closed at approximately $95.6 per ounce.
At the same time, the LBMA benchmark price was approximately $84 per ounce. The difference between the two markets equates to a premium of $11.9 per ounce, or roughly 14.15%.
Premiums of this scale indicate that domestic buyers are willing to pay significantly above international benchmarks to secure physical supply. The persistence of such spreads highlights the divergence between Western paper-dominated trading systems and Asian physical demand markets.
Silver futures pricing within China also reveals tightening spreads. The April 2026 silver contract on the Shanghai Futures Exchange currently trades at a 0.86% premium to the Shanghai Gold Exchange Ag(T+D) spot proxy.
In absolute terms, the spread equals approximately CNY 183 per kilogram, or about $0.83 per ounce.
While modest relative to earlier spreads, the narrowing indicates tightening contango between spot and near-dated futures. When spot pricing strengthens relative to futures contracts, the cost of carrying metal decreases, reflecting tighter immediate supply conditions.
Derivatives markets are also pricing unusually high volatility. Implied volatility for silver has recently reached approximately 102%, indicating expectations of unusually large daily price movements.
At that volatility level, the options market is pricing a daily move of roughly ±6.43%, equivalent to approximately ±$5.4 per ounce.
This level of implied volatility is consistent with a market undergoing rapid inventory changes across multiple exchanges. Rising volatility increases the cost of options and reflects the uncertainty traders are willing to pay to hedge against large price swings.
For bullion dealers, inventory data across exchanges remains the most practical indicator of supply conditions. COMEX stocks have fallen 34% since October 2025, SHFE inventories have dropped to approximately 255.95 tons, and combined Shanghai vaults stand near 718 tons. Monitoring weekly vault reports will provide early signals of whether the current drain stabilizes or accelerates further.
For conservative investors, the most relevant figures are the record withdrawal levels from the Shanghai Gold Exchange and the widening premium over LBMA pricing. A cumulative 436.8 tons withdrawn during the first two months of 2026 and a 14.15% domestic premium indicate persistent physical demand rather than purely speculative activity.
For traders, volatility and futures spreads define the tactical environment. Implied volatility above 100% implies daily moves exceeding $5 per ounce, while narrowing spreads between SHFE futures and SGE spot prices reflect tightening supply conditions in the near term.
Across COMEX, London, and Shanghai, the data points align around a single observable development: inventories are declining while physical demand remains strong. When multiple exchange systems simultaneously report falling stocks, widening premiums, and rising volatility, the market is describing its own structure through measurable figures.
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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