Silver Supply Shortage: Retail Frenzy

Something extraordinary is happening in the silver market. Retail investors in China and India are buying physical silver at such a pace that Swiss refiners are air-shipping metal to meet demand—a costly measure that underscores just how tight supplies have become. With Shanghai premiums exceeding $11 over COMEX, a two-tier market has emerged. Here's the inside story.

The Retail Buying Frenzy

The current silver shortage isn't being driven by industrial demand or institutional investors—it's retail buyers, particularly in Asia, who are overwhelming the supply chain.

In China, concerns about the yuan's stability and stock market volatility have triggered a rush into physical precious metals. In India, cultural affinity for silver (used extensively in jewelry and religious ceremonies) combined with investment demand has created unprecedented buying.

The result: dealers across Asia report multi-week wait times for physical delivery, premiums have ballooned, and refiners are taking extraordinary measures to meet demand.

Swiss Refiners Air-Shipping Silver

Normally, silver travels from refineries to dealers by sea—a slow but cost-effective method. Air freight costs roughly 10x more per kilogram but takes days instead of weeks.

The fact that Swiss refiners (Valcambi, PAMP, Argor-Heraeus) are air-shipping silver to Asia signals:

• Extreme urgency: Dealers need metal immediately, not in 4-6 weeks
• Premium coverage: Asian premiums are high enough to absorb air freight costs
• Inventory depletion: Local dealer stocks have been exhausted
• Refinery backlogs: Production can't keep up with order flow

This is not normal market behavior—it indicates a genuine physical shortage.

The Shanghai Premium Explained

One of the most telling indicators of silver scarcity is the Shanghai premium—the price difference between silver on the Shanghai Gold Exchange and COMEX in New York.

In normal markets, a $11 premium would be instantly arbitraged away—traders would buy COMEX silver and sell in Shanghai. The fact that this premium persists means physical silver simply cannot be delivered fast enough to close the gap.

COMEX Warehouses: The US Paradox

Here's the confusing part: COMEX warehouses in the United States hold over 300 million ounces of silver—seemingly more than enough to meet global demand. So why the shortage elsewhere?

Several factors explain this paradox:

1. Institutional vs. Retail Metal

Much of the COMEX inventory is held by institutions for hedging purposes. It's not available for retail purchase or industrial use—it serves as collateral for futures positions.

2. Registered vs. Eligible

COMEX distinguishes between "registered" silver (available for delivery) and "eligible" silver (meets standards but not offered for sale). Only registered silver can actually be withdrawn.

3. Export Logistics

Moving silver from US warehouses to Asian markets takes time and faces logistical bottlenecks. The metal exists, but getting it where it's needed quickly is challenging.

4. Strategic Hoarding

Some large holders may be deliberately keeping metal off the market, anticipating higher prices ahead.

The Two-Tier Market

The result is a bifurcated silver market:

This divergence suggests that paper prices may not fully reflect physical market conditions. Some analysts argue that if all paper claims were settled in physical metal, prices would need to be much higher.

Physical vs. Paper Silver

The supply crisis highlights the difference between owning physical silver and paper claims:

Physical Silver:

• You own actual metal with no counterparty risk
• Subject to premiums over spot price
• Requires storage and insurance
• May face availability delays
• Sell price includes dealer margins

Paper Silver (ETFs, futures):

• Convenient to trade, tight spreads
• Tracks spot price closely
• Counterparty risk (fund manager, exchange)
• May not be backed 1:1 by physical metal
• Can't take delivery (retail investors)

For a detailed comparison, see our guide on physical vs. ETF precious metals.

Buying Physical Silver in Singapore

For Singapore investors wanting physical silver exposure, here's the current situation:

• UOB: Offers 100g and 1kg PAMP Suisse silver bars; check current prices and call ahead for availability
• Silver Bullion Singapore: Broader selection but may have wait times on popular products
• BullionStar: Online platform with vault storage options
• The Safe House: Boutique dealer worth checking for inventory

Current buying tips:

• Call dealers before visiting to confirm stock
• Expect premiums 5-10% above spot (up from typical 3-5%)
• Consider larger bars (1kg) which typically have lower per-ounce premiums
• Be prepared to wait if ordering non-stocked items

How to Verify Physical Silver

With premiums elevated and shortages creating incentive for fraud, verification is important:

• Buy from reputable dealers: Stick to established names (UOB, Silver Bullion, BullionStar)
• Check assay certificates: Bars should come with certificates from the refiner
• Verify serial numbers: PAMP and other refiners maintain databases
• Weight test: Silver has a specific density that's hard to fake
• Avoid "too good" deals: If premiums are below market, be suspicious

Will the Shortage Continue?

The supply-demand imbalance shows no signs of resolving soon:

Factors sustaining the shortage:

• Asian retail demand remains strong amid currency/market concerns
• Industrial demand (solar, EVs) continues growing
• New mine supply takes 10+ years to develop
• Recycling can't fill the gap fast enough
• Geopolitical tensions (trade wars) sustain safe-haven buying

Factors that could ease the shortage:

• Sharp price rise reduces demand (some buyers priced out)
• Profit-taking after the rally
• Recession reducing industrial consumption
• Resolution of geopolitical tensions
• Increased recycling at higher prices

Investment Implications

The silver supply shortage creates both opportunities and risks:

Opportunities:

• Physical silver may outperform paper silver if the shortage intensifies
• Premiums could actually be recovered on resale if shortages persist
• Silver may continue outpacing gold

Risks:

• High premiums mean you start at a loss relative to spot
• If shortage eases, premiums could collapse
• Silver is highly volatile—20-30% corrections are common
• Storage and insurance costs for physical metal

Frequently Asked Questions

Why is there a silver supply shortage in 2026?

The shortage stems from a 200 million ounce deficit. Mine supply grows only ~1% annually (70% is byproduct), while demand surges from solar, EVs, and retail buying in Asia.

What does "Shanghai premium" mean for silver?

The Shanghai premium ($11+ over COMEX) indicates Asian buyers paying above global benchmarks for immediate delivery—a clear sign of genuine physical scarcity.

Why are Swiss refiners air-shipping silver?

Air freight (10x costlier than sea) indicates customers willing to pay premiums for speed and urgent demand that can't wait. This hasn't happened since 2011.

How do I know if I'm buying physical silver?

Physical silver means you receive actual bars or coins. ETFs represent claims on pooled metal. For physical purchases in Singapore, see where to buy and storage options.

Will the silver shortage continue?

Likely yes: mine development takes 10+ years, industrial demand keeps growing, and China is tightening exports.

Conclusion

The silver supply shortage of 2026 is real, driven by a perfect storm of Asian retail frenzy, industrial demand, and logistical constraints. Swiss refiners air-shipping metal and $11 Shanghai premiums are not normal market conditions—they signal genuine physical scarcity.

For Singapore investors, this creates both opportunity (exposure to a tight market) and challenge (elevated premiums, availability issues). The key is buying from reputable dealers, accepting current premiums as the cost of entry, and maintaining a long-term perspective.

As silver trades at $115/oz, the shortage supports prices—but also creates downside risk if conditions normalize. Use dollar-cost averaging and maintain balanced exposure to both gold and silver.