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Silver is experiencing a fascinating divergence in supply dynamics, with London vaults seeing an unprecedented decline in holdings while COMEX inventories continue to rise. Hugo Pascal, Chief Investment Officer at InProved, recently highlighted a historic drop in silver stored in London vaults, with holdings decreasing by 8.6% month-over-month to 23,528 tons. This marks the largest monthly decline since LBMA records began in July 2016, a shift that raises critical questions about the state of the physical silver market. At the same time, silver inventories at COMEX continue to expand, with a fresh inflow of 2.6 million ounces (82.1 tons) bringing total holdings to 363.4 million ounces.
The sharp decline in LBMA silver stocks is more than just a statistical move; it signifies a fundamental tightening in available supply. Of the silver remaining in London vaults, a staggering 72.2% is now allocated to silver-backed ETFs, up from 66.8% previously. This means that while London vaults still hold 23,528 tons, only 6,534 tons remain available for physical settlement or delivery—a critical reduction that could impact market liquidity.
The decrease in LBMA silver stocks is closely tied to outflows from ETFs, which saw a 1.15% month-over-month decline, bringing total ETF-held silver to 16,994 tons. While ETF outflows suggest some degree of investor repositioning, the sheer scale of the drop in LBMA reserves suggests something more structural at play. Whether it’s increased demand for physical silver in other regions, industrial consumption drawing down supplies, or institutions shifting their holdings elsewhere, the numbers point to tightening availability in one of the world’s most significant silver storage hubs.
Meanwhile, across the Atlantic, COMEX vaults tell a different story. While London sees historic outflows, COMEX inventories continue to swell, with another 2.6 million ounces flowing in. This brings the total COMEX silver stockpile to 363.4 million ounces, signaling a concerted effort to build reserves. The inflows at COMEX suggest that market participants are preparing for increased futures activity and potential delivery demand. The contrast between shrinking LBMA holdings and rising COMEX inventories highlights the shifting landscape in silver markets—where physical silver is leaving traditional vaults but being replenished elsewhere.
What makes this divergence even more striking is its potential impact on price dynamics. If the trend of declining London silver inventories persists while demand remains strong, the physical market could face increasing tightness, leading to a premium on deliverable silver. At the same time, COMEX’s growing inventories suggest that futures liquidity remains strong, but whether this translates to readily available physical metal remains an open question.
Hugo Pascal’s analysis underscores a critical moment in the silver market. The largest monthly drawdown in LBMA silver stocks since record-keeping began is not an ordinary occurrence—it signals a shift in how silver is stored, allocated, and demanded. Whether this represents a temporary reshuffling of reserves or a deeper structural shift remains to be seen, but one thing is clear: the silver market is undergoing significant transformation, and the forces driving it are anything but conventional.
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