Global Silver Shortage Deepens as Physical Premiums Surge Worldwide

India Faces Severe Physical Silver Crunch

India has become the epicenter of a global silver squeeze, with physical metal prices soaring far above futures. On the Multi Commodity Exchange (MCX), traders report a widening gap between spot and futures markets. Spot silver in cities like Nagpur and Ahmedabad is selling for around ₹1.65 lakh per kilogram, while MCX futures trade near ₹1.50 lakh — a 10% premium. In dollar terms, that’s roughly USD 51 per ounce in spot prices compared to USD 46 in futures.

The crunch has grown so severe that major Indian mutual funds have temporarily halted new silver ETF inflows. Both UTI Asset Management and Kotak Mutual Fund cited a shortage of physical silver as the reason. Jewellers and industrial users are experiencing delivery delays of up to a week, while wholesalers are reportedly holding back inventory, anticipating further price gains.

Pressure Mounts in the U.S. Futures Market

Across the U.S., the COMEX silver market is showing similar signs of strain. Analysts note that one-month silver lease rates – a measure of short-term borrowing costs – have spiked above 30% in some sessions. This sharp rise suggests tightening availability of physical silver.

Traders have increasingly requested “stand-for-delivery,” meaning they want the actual metal rather than cash settlement. As a result, open interest has dropped, and spot silver briefly touched an all-time high of USD 49.6 per ounce before slightly retreating. Although delivery failures remain rare on COMEX, the rising cost of borrowing and immediate settlement premiums indicate growing stress within the market.

China and Europe Join the Squeeze

China’s silver market has also tightened. Demand from the solar manufacturing sector has driven spot prices roughly 15% above international benchmarks. Chinese buyers are reportedly paying about USD 57 per ounce, while global futures average around USD 50. Shipping delays and export restrictions on refined silver have only worsened the imbalance.

In Europe, London’s bullion market — a traditional global hub — is seeing consistent silver outflows to U.S. vaults. Analysts describe this as a “physical migration” that’s reducing liquidity in London and widening the gap between futures and spot pricing.

Global Impact and Market Outlook

The widening divide between paper and physical silver highlights a deepening structural imbalance in global supply. Industrial demand from renewable energy, combined with investor hoarding and tightening mine output, has fueled the squeeze.

Experts warn that if these conditions persist, futures markets may lose credibility as reliable price discovery tools. Many expect physical premiums to stay elevated until imports normalize or exchanges modify contract terms to better reflect actual metal availability.

For now, from Mumbai to Shanghai to New York, one reality dominates: investors are willing to pay extra for what silver futures cannot always guarantee — the real metal itself.