There has been a mysterious drop in silver stocks on major international trading platforms that created quite a buzz. Could it make the silver price surge next year? Here’s what you need to know.

Why Are Physical Silver Reserves Suddenly Dropping?

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Silver has been in the news quite a bit lately.

First, more than a year after the Reddit-fuelled short squeeze, the silver price dropped below the psychologically important $20 per troy ounce (about 31,1 grams) in September. 

. Silver stocked in COMEX, and LBMA vaults suddenly dropped to record lows, triggering some talks and speculation.

What happened with silver COMEX and LBMA stocks?

What is the explanation for their decline?

What could it mean for the silver price in 2023?

Recently, there has been a record number of withdrawals of physical silver from major trading platforms, such as the LBMA and COMEX.

The official data shows that, at the end of October 2022, the LBMA held a total of 26,502 tonnes of silver (about 883,417 silver bars) in its vaults.

 since July 2016! And, as the chart below shows, the quantity of silver held in LBMA vaults has been dropping over the past year:

graphs showing how LBMA gold and silver stocks have changed between November 2021 and September 2022, indicating a sharp drop in silver stocks.

Now, almost the same thing happened across the Atlantic. At the end of October 2022, COMEX registered silver vaults dropped below 40 million ounces for the first time since October 2017.

The graph below shows how COMEX registered silver stocks have literally been falling off the cliff in recent months:

a graph showing a sharp drop in registered silver stocks on COMEX between 2018 and 2022.

Naturally, this “mysterious” silver drawdown from LBMA and COMEX vaults has created 

this coming spring🤔, with fans talking about 

So, the internet is all excited about this silver stock drain-down. But, it's not just the people on Twitter who are thrilled — silver has been a hot topic among experts too.

According to Nicky Shiels, Head of Metals Strategy at MKS PAMP, investors appear to be 

willing to pay 5 times more for transportation

 just so that they can get their hands on that coveted silver bar!

So, at this point, one thing is clear: the situation is quite unprecedented, but the question you are probably asking right now is: 

What is the explanation for the decline in silver stocks?

a man untangling the mystery of the drop in LBMA and COMEX silver stocks in September and October 2022.

As they say, you can never be completely certain of anything in life, but you can always get a pretty good idea of what's happening by asking top experts.

, the Executive Director and Secretary at the Silver Institute.

Based on what they've told us, we’ve outlined two 

 for this steady decline in silver inventories:

Explanation #1: Growing deficit in the silver market

After several years of recording a surplus, we saw the silver market transition into a deficit in 2021. This year, the market is forecast to see a much larger deficit. Importantly, we expect the silver market to remain in a deficit for the foreseeable future.”

“The Silver market is currently in a mild fundamental deficit of about 50 million ounces this year. 

That deficit is expected to grow over the next 5 years to about 100 million ounces, as supply remains rather flat and demand continues to grow

Explanation #2: Growing demand for physical silver

“[The silver market deficit] tells us that silver demand is pretty strong, across most key segments. In the industrial market, photovoltaics continues to perform well, offsetting weakness in the consumer electronics field. 

Demand for silver bars and coins has also strengthened this year in all key markets, as retail investors respond to high inflation and the Russia-Ukraine war

. Finally, jewelry and silverware demand is set to rise this year, helped in particular by robust Indian buying.”

demand for silver has been incredibly strong

 this year due to a combination of retail demand and industrial demand. Regionally, 

with imports into India already at record highs

 the fact that both LBMA and COMEX silver stocks are in decline reflects this deficit in the silver market, which basically means that there's more demand for physical silver than what comes out of mines. Or simply that someone just wanted to get the shiny 

A man looking at the rising blue graph representing rising silver prices

In short, the jury is split on this one. 

On one hand, the silver price may get some support from the 

growing deficit driven by unprecedented demand for physical metal

, meaning that there’s a potential for it to go up:

At the same time, because silver is both a 

, its price can also be affected by what’s happening with base metals, a.k.a iron, steel, copper, nickel, etc. 

, silver will be weighed down as some base metal prices come under pressure,”

As a whole, a lot will depend on what the Fed is doing with the interest rates, and how this will affect the U.S. dollar and yields.

Just like gold, the silver price is also impacted by the Fed’s monetary policy and the overall macroeconomic situation. 

So, on our side, we will be watching the situation closely and keep you posted.

. So if you were thinking about getting your hands on some silver, now could be a good time!😉 

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