Silver’s October Nightmare: Could the 2025 Physical Squeeze Return in 2026?
October 10, 2026 · COMEX · LBMA · Physical Silver · Market Structure
Last October, the silver market experienced an extraordinary physical liquidity squeeze. One year later, COMEX inventories are lower, delivery activity remains substantial, and global supply is still tight. Is another disruption approaching?
1. The Silver Market Has Not Forgotten October 2025
In October 2025, the immediate availability of physical silver became unusually valuable. London silver borrowing costs surged, spot-market premiums widened, and traders transported silver bars by air from the United States and China to London.
The episode exposed a crucial distinction: owning financial exposure to silver is not the same as having metal available for immediate delivery. A year later, investors are asking whether the same pressures could return.
2. What Caused the October 2025 Squeeze?
Earlier in 2025, uncertainty about possible U.S. import tariffs encouraged metal to accumulate in American warehouses. London, a major over-the-counter bullion trading hub, experienced a shortage of freely available metal. Silver-backed investment products held substantial quantities of vault inventory, reducing the flexibility of immediate supply.
Bloomberg reported that London silver lease rates reached approximately 34.9% on October 9, 2025, before declining to about 5.6% by October 27 as conditions eased. Reuters reported that silver shipments from the United States and China helped relieve the squeeze.
3. The COMEX Structure: Futures Contracts vs. Deliverable Silver
A standard COMEX silver futures contract represents 5,000 troy ounces, or approximately 155.5 kilograms. Most traders close or roll positions rather than taking physical delivery. As a result, futures open interest can represent far more silver than the metal currently registered for delivery without indicating an automatic shortfall.
COMEX warehouse inventory has two main categories. Registered silver has delivery warrants issued. Eligible silver meets the required specifications but is not registered for futures delivery. Eligible metal exists physically, but its owners must take further steps before it enters the registered delivery pool.
Lower overall inventories may increase vulnerability. However, the reported recent increase in registered stocks is an important counterweight to claims of an immediate delivery crisis.
4. Physical Delivery Activity Remains Substantial
Several 2026 COMEX delivery months recorded substantial silver delivery notices, particularly July and September. Yet delivery notices are not identical to physical warehouse withdrawals. Ownership of a warehouse warrant can transfer while the metal remains in the vault.
The figures show meaningful settlement activity, but they do not alone prove that delivery demands have increased continuously for two years or that the exchange is running out of silver.
5. Backwardation: The Signal That Matters Most
In contango, later-dated futures are generally priced above nearby contracts, reflecting financing and carrying costs. In backwardation, a nearby contract trades above a later-dated contract. An unusually large nearby premium can indicate that immediate access to metal is valuable.
Imagine silver for immediate delivery priced at $65 per ounce while a three-month contract trades at $62. That hypothetical $3 premium could signal near-term tightness. But futures spreads also reflect interest rates, storage, location and contract differences; backwardation alone does not establish manipulation or imminent default.
6. Is 2026 More Dangerous Than 2025?
There are reasons for concern. COMEX total stocks are substantially below the elevated levels reported in October 2025. The Silver Institute’s World Silver Survey 2026 forecast a global silver market deficit of approximately 46.3 million ounces for the year, implying continued reliance on above-ground stocks.
But there is a meaningful offsetting development: London’s total vault holdings have recovered. Reported LBMA silver stocks rose from 24,581 tonnes at end-September 2025 to approximately 28,985 tonnes at end-September 2026, an increase of roughly 18%.
7. December 2026: The Next Important Test
A third-party compilation reported approximately 83,484 December silver futures contracts outstanding on October 8, equivalent to about 417.4 million notional ounces. This is much larger than registered COMEX inventory, but the comparison is not a forecast of delivery demand. Most positions may be closed or rolled before delivery.
The meaningful test is how much December open interest remains near first notice day, whether sellers can obtain warrants, and whether registered stocks and London liquidity tighten at the same time. A large open-interest figure in early October is not evidence of an imminent delivery default.
9. Three Scenarios for the Final Months of 2026
10. Five Indicators to Watch
The October 2025 squeeze demonstrated how quickly a market with substantial global stocks can become stressed when metal is in the wrong place or committed to owners unwilling to lend or sell.
That vulnerability remains. COMEX inventories are lower, delivery activity is meaningful and the global market is forecast to remain in deficit. Yet London’s vault holdings have recovered and recent registered COMEX stocks have increased.
Another silver squeeze in late 2026 is credible, but the evidence does not justify declaring it inevitable—or claiming that COMEX default is imminent. The next decisive signals will come from the December delivery cycle, the nearby futures curve and the cost of borrowing physical silver.
Sources and Further Reading
- Reuters — Tons of silver from US, China ease London spot market squeeze (Oct. 20, 2025)
- Bloomberg — Silver Lease Rates Plunge as Historic Market Squeeze Eases (Oct. 27, 2025)
- The Silver Institute — World Silver Survey 2026
- LBMA — London Vault Holdings Data
- CME Group — Delivery Notices and Warehouse Data
- MetalCharts — COMEX Silver Inventory
- GoldSilver.ai — COMEX Silver Delivery Compilation
Editorial note: This analysis reflects reported information through October 9, 2026. Some inventory and delivery statistics come from third-party compilations and should be reconciled with original CME reports. Current futures spreads and comparable lease rates were not independently verified. Illustrations are editorial artwork; charts use reported summary figures. This article is for informational purposes and is not investment advice.
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