Silver's Squeeze Gives Way to a Glut

Freely available silver in London's commercial vaults has risen 70% since October 2025, Deutsche Bank's Daniel Ghali wrote, according to Mining.com. Ghali told Kitco that his measure of free-floating inventory is back to its highest level since November 2024. At the end of August, more than 914 million oz. sat in those vaults, and more than 300 million oz. of that could be bought, Deutsche says.

The market that could not find metal a year ago now has more than it needs. That matters beyond the trading desks. Silver peaked at $121.67 in January 2026, FXEmpire says, and has been unwinding since. Solar manufacturers, jewelers and fund managers are all repricing what scarcity was worth, and Deutsche's call is that the premium should keep draining.

From Extreme Lease Rates to a Surplus

The contrast with last October is stark. Tight supplies of readily available metal in London drove borrowing costs to extreme levels then, Mining.com reports. FXEmpire puts silver lease rates at around 39% in October 2025, against a normal rate below 1%. The World Silver Survey 2026, as relayed by FXEmpire, estimated London's free float at about 136 Moz at the end of September 2025, a record reported low. Physically backed products held 83% of London inventories, leaving only 17% for market operations.

Ghali's description of that squeeze is blunt. The market was probably at its scarcest, he told Kitco, in the last year since the Hunt brothers tried to corner it almost half a century ago.

"Peak silver scarcity is clearly in the rear-view mirror," Deutsche Bank's head of metals research wrote in his report, per Mining.com.

Silver changed hands at $61.80 per ounce at 7 a.m. Eastern on October 5, 2026, Fortune reported. A month earlier it was $66.21, so it is down 6.66% over that stretch, and $48.51 a year ago. Mining.com says spot silver is down about 14% since the start of 2026 but about 26% above its level of a year ago. Kitco describes the all-time highs early in the year as followed by a 50% pullback after the start of the Iran war.

Demand gave way first

The price did the work. "The high price environment has actually catalyzed really fast-paced demand destruction," Ghali told Kitco. Deutsche estimates that global silver use in solar will fall by more than 20% this year, with Chinese demand down 33%. Silver made up more than 30% of solar-module manufacturing costs earlier this year, against less than 10% at the start of 2025, Mining.com reports. That share has since slid to about 14%, as manufacturers thrifted the metal out of their cells.

JPMorgan sees the same demand collapse. Gregory Shearer, who heads its base and precious metals strategy, says solar demand could fall by around 30% this year, a reduction of roughly 60 million oz. He attributes very strong March Chinese imports to front-loading before an export VAT rebate on photovoltaic products was removed on April 1, followed by destocking and weaker industrial demand. JPMorgan also says India's demand has weakened under higher import duties and tighter import rules.

Where the forecasters part

Deutsche's read is that the market now has more inventory to cover a shrinking deficit, and possibly a physical primary-market surplus in the coming year. Spot silver could average $70 per oz. by the second quarter of 2027, it says, still below the levels of the first half of 2026.

Others are less sure. The World Silver Survey, released April 15, put the 2025 deficit at 40.3 Moz and projected a sixth consecutive annual deficit of 46.3 Moz for 2026, FXEmpire says. Ad-hoc-news.de reports that Metals Focus and the Silver Institute still penciled in a deficit of about 46 million ounces barely a week before Ghali's comments. JPMorgan has been cutting rather than reversing: its 2026 average forecast fell from $84/oz in May to $70/oz in a report published August 13, 2026. It now sees $63/oz in 2027.

A deficit and a glut can coexist. A market can consume more than mines produce and still hold plenty of metal, because stockpiles built during the squeeze can cover the shortfall. That is Deutsche's point, and it is why vault data matter more than the flow estimates.

Reading the vault numbers

Those numbers need handling with care. The LBMA reports 28,431 tonnes of silver in London vaults at the end of August 2026, valued at $64.2 billion, a 0.77% monthly increase. The data run one month in arrears and cover metal within the M25 but not holdings by retailers, individuals and smaller vaults outside the London Clearing system. The LBMA notes the Bank of England holds no silver.

The monthly LBMA series shows total metal, not what is freely available, and the free float is where Deutsche's 70% comes from. It is also Deutsche's own measure, not an exchange statistic. Our own BLM claim-staking series, which settles four months late, says nothing about this turn, so the case rests on inventories and prices.

There is also a second cushion. Ghali notes that Comex still holds a stockpile too large for its open interest, a backstop if London tightens again. Ad-hoc-news.de says Comex inventories rose by roughly 2.5 million ounces in the week through September 25, to 332.6 million ounces.

What could break the thesis

Deutsche flags China, where silver carries a persistent premium despite weaker wholesale demand and rising inventories. It calls that an upside risk to its supply outlook. Silver-backed funds could release about 40 million oz. by December 2027 if patterns from earlier Fed hiking cycles repeat, Deutsche estimates. A J.P. Morgan page dated September 25, 2026 records the Fed's September increase as the first hike in three years.

For positioning, Ghali's setup argues for silver underperforming gold, with a weaker silver-to-gold ratio. JPMorgan's Shearer likewise sees the gold-to-silver ratio moving toward 70 over the second half of 2026 and around 75 over 2027. It had sunk below 45 in late January and is now around 70.

Silver is no longer short of metal. Whether it is short of buyers is the question the next lease-rate print will answer.