Silver Market Outlook: Physical Tightness, COMEX Inventory, and What Investors Should Watch

MarketBriefDaily • Feb 07, 2026

Silver often behaves like two related but distinct markets. On one side is the futures price that trades on exchanges and reacts to macro headlines, rates, and short-term positioning. On the other side is the physical market, which is driven by available inventory, industrial demand, and the cost of sourcing real metal.

When physical supply tightens, these two layers can diverge. Price charts alone do not always capture what is happening underneath. Right now, several physical-market indicators suggest that supply conditions are becoming tighter than they were in prior years. This does not guarantee a near-term price spike, and it does not imply any kind of system failure. It does increase the probability of volatility and makes delivery mechanics more important to watch over the coming weeks.

This post explains what COMEX is, why registered inventory matters, what recent inventory trends imply, how lease rates signal physical tightness, and how investors can think about positioning without overreacting.

What COMEX Is and Why It Matters for Silver Prices

COMEX, part of the CME Group, is the primary U.S. futures exchange for precious metals and one of the main price reference points for silver globally. Most trading activity on COMEX is in futures contracts. These contracts are primarily used for hedging and speculation and are usually closed out in cash before delivery becomes relevant.

Delivery still matters because it anchors futures prices to physical reality. The ability to convert futures contracts into physical silver is what links paper prices to supply and demand in the real market. When physical supply is abundant, delivery mechanics stay in the background. When physical supply tightens, delivery behavior, warehouse inventories, and borrowing costs become more important inputs for understanding price risk.

Registered vs Eligible Inventory: The Number That Actually Matters

COMEX reports two types of silver inventory:

• Registered silver: Approved and available for delivery against futures contracts.
• Eligible silver: Stored in COMEX-approved vaults but owned by private parties and not automatically available for delivery.

For delivery risk analysis, registered inventory is the relevant number.

As of late February 2026, CME warehouse reports show registered silver near ~103 million ounces. This figure changes frequently, which is why tracking trends is more informative than focusing on any single print. Total COMEX inventory is significantly larger, but most of that metal is not immediately deliverable. Investors who focus only on total inventory can overestimate how much silver is actually available to meet delivery demand.

Inventory Trends: Why the Direction Matters More Than the Headline

The trend in registered inventory is more important than the absolute number. Over recent months, vault data has shown repeated net outflows, with daily changes during active periods often discussed in the ~500,000 to 800,000 ounce range. The precise number on any given day is less important than the persistence of the drawdown.

For investors tracking physical market conditions, three metrics are useful:

• The 30-day net change in registered inventory
• The 12-month percentage change in registered inventory
• Whether withdrawals are accelerating into major delivery months

Sustained drawdowns reduce the system’s buffer. A thinner buffer does not imply delivery failure, but it does increase the market’s sensitivity to delivery demand and raises the likelihood of short-term price swings.

February 27 and the March Delivery Window

The first notice day for March silver delivery is February 27. This is the point at which futures positions must be structured appropriately if holders intend to stand for delivery. Around this window, market participants pay close attention to how much open interest is likely to convert into physical demand.

The math is straightforward:

• Registered inventory is currently on the order of ~100 million ounces.
• Open contracts represent multiples of that amount in notional silver exposure.
• If a higher-than-normal share of contract holders opt for delivery, registered inventory can decline rapidly.

This does not imply COMEX is unable to function. It does imply that delivery windows can become periods of elevated volatility, particularly when inventory buffers are thin.

The Silver Lease Rate: A Practical Scarcity Signal

The silver lease rate reflects the cost of borrowing physical silver. When metal is easy to source, lease rates are typically low. Long-term norms during periods of ample availability are often cited in the ~0% to 0.5% range.

Recent data points to lease rates closer to ~8%, which is a large deviation from historical baselines. Lease rates rise when physical silver becomes harder to obtain and when demand for borrowed metal increases. Elevated lease rates do not predict a specific price move on their own, but they are a strong real-world indicator that physical supply is tight.

For investors who want to track physical conditions, lease rates are one of the most useful weekly indicators because they reflect actual sourcing conditions rather than market sentiment.

Paper Silver vs Physical Silver

Most investors gain silver exposure through paper instruments such as futures, ETFs, mining equities, and options. These vehicles are liquid, easy to trade, and efficient for short-term positioning.

The trade-off is that paper instruments carry structure and counterparty considerations. In periods of physical tightness, paper prices and physical premiums can diverge. Physical silver can trade at premiums relative to paper pricing in some regions when supply is constrained.

This does not mean paper instruments are “wrong” or that physical always outperforms. It means that during tight physical conditions, the linkage between paper and physical can weaken temporarily, and investors should understand what kind of exposure they actually hold.

How COMEX Manages Stress in Tight Conditions

Higher delivery demand does not imply exchange failure. COMEX and clearing members have mechanisms to manage settlement pressure, including:

• Economic incentives and negotiated settlements that can make cash settlement more attractive than physical delivery, within exchange rules and bilateral agreements.
• Margin requirement changes that force leveraged participants to reduce exposure.
• Position limits and rule adjustments that can moderate speculative positioning.

These tools can create short-term price volatility and forced position reductions. They do not create physical silver. If physical supply remains tight, administrative measures may dampen price moves temporarily without resolving the underlying supply-demand imbalance.

The Fundamental Backdrop: Supply Deficits and Industrial Demand

Silver has experienced multi-year supply deficits by several industry estimates. Estimates of annual deficits vary by source and whether above-ground stock changes are included, but multiple industry reports point to persistent shortfalls.

On the demand side, industrial use remains a key driver. Solar manufacturing alone is often cited in the low double-digit percentage range of annual silver demand, with year-to-year variation depending on deployment growth and efficiency gains in panel manufacturing. Electronics, power infrastructure, and vehicle electrification also contribute to steady industrial demand growth.

On the supply side, silver production is constrained by the fact that a large share of output is a byproduct of copper, lead, and zinc mining. This makes silver supply relatively slow to respond to higher prices and contributes to persistent tightness when demand rises.

Practical Positioning: How to Use This Information Without Overreacting

Silver is volatile. The goal is not to predict a specific price target but to manage exposure in a way that avoids forced decisions during drawdowns.

Three practical guidelines:

1. Track physical signals weekly:
   • COMEX registered inventory trends
   • Delivery demand around first notice days
   • Silver lease rates versus historical norms
2. Size positions based on portfolio impact:
   If silver is 10% of your portfolio and falls 30%, your portfolio impact is 3%.
   If silver is 20% and falls 30%, the impact is 6%.
   The difference determines whether volatility is manageable or destabilizing.
3. Understand your exposure type: Paper instruments offer liquidity and ease of trading. Physical exposure offers direct linkage to supply tightness but comes with storage and liquidity considerations. Your mix should reflect your time horizon and risk tolerance.

Conclusion

Physical-market indicators for silver deserve attention. COMEX registered inventory is relatively low compared with prior years, delivery windows matter more when buffers are thin, and lease rates are elevated relative to historical norms. None of this guarantees a near-term price surge. It does increase the likelihood of volatility and makes physical-market signals more relevant than price charts alone.

If you follow silver as an investor, trader, or hobbyist, this is a period where understanding market mechanics matters as much as technical analysis.

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Keywords: silver market outlook, COMEX silver inventory, silver lease rate, physical silver vs paper silver, silver futures delivery, investing in silver