Silver: The Strategic Squeeze of 2026

— By Tejas

Silver is not gold.
And in early 2026, that distinction has stopped being academic.

Gold is a mirror. It reflects fear, inflation, and loss of trust in paper money.
Silver is different. Silver is a hybrid asset — part industrial fuel, part financial instrument, part speculative vehicle.

When silver rallies, it never does so for one reason.
It moves when three forces collide:

• Industrial scarcity

• Financial leverage

• Human psychology

Today, we are standing at the most violent intersection of these forces in decades.

I. Silver Is No Longer a Story — It’s a System

For years, silver demand was discussed as a “future theme.”
In 2026, it is the physical architecture of modern civilisation.

Global silver demand in 2025 reached approximately 1.15 billion ounces, marking the fifth consecutive year of structural deficit. Unlike gold, which mostly sits in vaults, silver is being consumed, embedded, and locked away.

You don’t see silver — but you live inside it.

• AI & Data Infrastructure
  Every data centre, semiconductor, switch, and conductor relies on silver’s unmatched conductivity. In a world racing toward AI scale, silver is not optional — it is irreplaceable.

• The Solar Mandate
  2025 marked a global pivot toward TOPCon solar panels, which use roughly 50% more silver than earlier technologies. This demand is policy-backed. Factories don’t negotiate prices — they absorb them.

• India, the Whale
  India has quietly become the most underestimated force in the silver market.
  In 2025 alone, India imported roughly 6,000 metric tons — about 193 million ounces — nearly one-quarter of global mine supply.

  The old stereotype of India as a “price-sensitive buyer” is dead. India is buying the rip, creating a physical floor that Western short-sellers are struggling to break.

II. The Inventory Crisis: Where Price Meets Reality

To understand why the market feels tense, you have to stop watching the price and start watching the vaults.

The COMEX Cliff (Commodity Exchange)

As of mid-January 2026, Registered silver — metal actually available for delivery — sits under severe stress. As per current system, Silver futures needs to be settled with physical silver if the buyer of the future asks for it.

• January deliveries, a traditionally quiet month, have already exceeded 36 million ounces in the first two weeks.

• March 2026 open interest, the next major contract, represents 350 millions of ounces.

• Total Registered inventory across COMEX vaults is roughly 80–90 million ounces.

The math is uncomfortable.

If even a fraction of March longs demand delivery, the system strains.

The China Gatekeeper

On January 1, 2026, China — which controls 60–70% of global silver refining capacity — implemented strict export licensing on refined silver.

This closed the world’s safety valve.

Silver didn’t disappear.
It simply stopped flowing.

And when supply becomes directional, price stops behaving politely.

III. Speculation: Calm on the Surface, Fire Underneath

At first glance, futures positioning looks surprisingly restrained.

Futures Market Reality

CFTC data (Jan 6, 2026) shows non-commercial net longs near 29,000 contracts — bullish, but well below the 50,000–60,000+ levels seen during the 2011 bubble.

So why does this feel manic?

The Froth Has Moved

The excess is no longer in outright futures.
It has migrated to the options market.

• Heavy call open interest at $80, $100 and $110 strikes

• Short-dated expiries

• Highly convex bets

This creates a gamma squeeze. As prices rise, dealers must buy futures to hedge, pushing prices higher still. It is a self-feeding loop.

Add to this extreme backwardation — where buyers are paying $0.70+ per ounce to get silver now instead of later — and the message is clear:

This isn’t speculative excitement.
This is physical urgency.

IV. The Stress Dashboard Professionals Are Watching

Lease rates alone no longer tell the story. In 2026, silver stress must be read as a system.

1. The East–West Spread (Shanghai Premium)

Physical silver in Shanghai is trading $8–$10 above Western prices.

As long as this premium stays above $5, silver will drain eastward i.e. moving from western countries’ vault to eastern countries’.
If it collapses toward $1–$2, pressure is easing.

2. Gold-to-Silver Ratio Velocity

The ratio has collapsed from 80:1 to nearly 51:1 in months.

Below 50, squeezes historically accelerate.
Velocity matters more than level.

3. Silver Swap Rates

The 1-year silver swap rate near -7% tells institutions are paying heavily to secure physical metal today.

Markets don’t beg unless supply is real.

4. Retail Premiums

In India, silver trades near ₹2.6–₹2.7 lakh/kg, with premiums rising.
When dealers quote delivery timelines instead of prices, stress has reached the consumer layer.

V. Are Banks Being Forced to Deliver?

Not by conspiracy.
By economics.

Backwardation puts shorts into a lose-lose choice:

• Roll the position → pay heavy premiums

• Deliver → lose hard-to-replace inventory

• Cash settle → crystallise losses at record prices

January has already forced large deliveries.
March will test the system’s credibility.

If delivery requests exceed 50–60 million ounces, exchanges face uncomfortable decisions — margin hikes, rule changes, or cash settlement.

None are bullish for confidence.

VI. India’s Final Transformation

India is no longer reacting to price.
It is setting it.

• CEPA (Comprehensive Economic Partnership Agreement) arbitrage drained Dubai and London inventories

• ETFs have democratized silver ownership

• SIP flows buy dips automatically

• Industrial demand from solar and EVs competes with investors for the same bars

Silver has become a Veblen asset — demand rises as price rises.

That changes everything.

VII. The Two Paths Ahead

Scenario A: Blow-Off

If China’s supply choke persists and India keeps bidding, silver could overshoot violently. Triple-digit prices would not be irrational — just unstable.

Scenario B: Cooling Without Collapse

A geopolitical easing or margin intervention could trigger a 15–25% correction. But corrections don’t create mines or replace silver in solar panels.

They reset psychology — not structure.

Closing: Don’t Become the Liquidity

The most dangerous mistake investors make with silver is short-term thinking applied to a long-cycle asset.

Silver does not reward excitement. It rewards context.

Experienced investors don’t ask, “Is silver going to ₹3 lakh or $100?”
They ask, “Where are we on the curve — and who is forced to act next?”

Right now:

• Industrial users are forced to buy

• Banks are forced to manage inventory

• Supply is forced to wait

Eventually, leverage will unwind and narratives will cool. When that happens, silver will not fail. It will simply return to structure.

And the opportunity will belong not to the loudest voices —
but to those who understood the cycle early enough to survive it.

Don’t become the liquidity for someone else’s exit.

Warm regards,
Tejas