Investors Need to Realize Silver Supply Bailouts Are No Longer Available
Investors Need to Realize Silver Supply Bailouts Are No Longer Available
John SeetooMon, June 1, 2026 at 12:47 PM UTC
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In September 2020, JP Morgan paid a landmark $920 million settlement to resolve charges of “spoofing” - placing and cancelling fake buy or sell orders - to manipulate the silver market. A little over five years later, JP Morgan closed out a 3.17 million oz. silver short position (633 delivery notices), conveniently right before silver shot up from $73 to over $120/oz.
For over half a century, the COMEX silver futures market, along with the LBMA in the 1980s, have taken advantage of their pricing flexibility of paper futures, for which 90% on average settle in cash without any delivery. The Shanghai Futures Exchange (SFE), which began in 1993, established a model requiring physical metal be deposited for settlement against any delivery demand. Despite silver being a depleting asset, the futures markets in the west have long been geared more for speculation and hedging than actual exchange of physical asset and title. As a result, the COMEX and LBMA have had the power to artificially keep silver prices low for its banking and institutional trading clients. This ability to bail out these large financial entities is rapidly running out of fuel, as the overwhelming demand for deliveries has halved COMEX silver inventories since October 2025 to the time of this writing.
As a result, ETFs with physical silver bullion and silver mine stock holdings may very well see a bullish run in the next 24 months that may dwarf 2025’s triple digit gain. Based on his recent comments and observations about silver, Eric Sprott of Sprott Asset management has two ETFs that might bear watching:
Sprott Physical Silver Trust (NYSE: PSLV)
Sprott Silver Miners and Physical Silver ETF (NASDAQ: SLVR)
An Unsustainable Arbitrage
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The current 11% arbitrage spread for silver between COMEX and SFE will collapse if another short squeeze occurs, since COMEX will be unable to deliver and SFE prices will continue to soar.
When a futures exchange in one country inexplicably detaches from a similar exchange in another nation to create an arbitrage situation, a few hours, or at least a day, might be considered a pricing glitch. When it lasts for months on end, it begs the questions as to why is it happening, and who’s making a profit from it?
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Such a scenario has been an ongoing situation between the COMEX in US and the LBMA in UK on the offer side of silver bullion, vs. the sell side on the Shanghai Futures Exchange (SFE). Unlike most futures and options trades, which usually settle in cash, the COMEX is seeing physical silver delivery demands explode. COMEX deliveries in 2024 totalled 203 million oz., which ballooned to 474 million oz. in 2025, and the trend has continued through to the present, throwing them both into backwardation since Q3 2025. Q1 2026 alone has seen COMEX sending 165 million oz. out the door so far, with no end in sight.
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At the same time, traders and investors have been taking delivery to both accumulate and arbitrage sell on the SFE at a premium (most recently over 11% at the time of this writing) as high as 45% during peak volatility. When the COMEX and LBMA paper markets are quoting silver at $77/oz. while SFE physical markets are at a premium equal to $86/oz. an unsustainable arbitrage exists that will collapse if no bailout supplies of physical metal emerge. The result will be a further price escalation and a potentially huge short paper squeeze scenario as futures markets will no longer have the ability to suppress pricing for their clients to close out their positions.
Why Have Silver Supply Bailouts Evaporated, and Who Will Gain From It?
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Billionaire ETF founder Eric Sprott believes that mining stocks held in his SLVR ETF can gain up to 40X if silver reaches $150/oz.
There are a host of reasons as to why silver supplies have become scarce, but here are some of the primary ones:
Industrial demand for silver has skyrocketed, due to A.I. data center proliferation, EVs, solar panels, smartphones,and a panoply of other electronic devices, with humanoid robots the latest addition to the list.
Asian markets have consistently maintained their premium prices, no matter the price drop degree of the COMEX or LBMA. Export restrictions, high VAT (13%+), logistics hurdles, and overwhelming local absorption prevent silver bullion from flowing back to refill Western exchanges.
Efforts to ramp up mining operations for new silver have been minimally effective in offsetting the supply/demand imbalance, which has continued for six consecutive years, with 2026 alone looking at a 40 million oz. deficit.
Both the US and China have declared silver as an essential mineral vital to national security concerns, further limiting export possibilities.
Large industrial users like Samsung have made direct deals with silver mines to buy silver at a substantial premium above current prices, bypassing third party resellers and taking responsibility for their own refining, handling, and storage costs, thus reducing available silver for COMEX.
Billionaire silver investor and ETF founder Eric Sprott has gone on record predicting $150/oz. Silver can result in a 10X to 40X gain for silver mining companies. Given that numerous analysts have predicted silver can go anywhere from $100 to $300/oz. this year, Sprott is seeing that as the sole source of new metal, silver mines’ values will appreciate based on anticipated future silver prices, which will only continue to soar unabated, given current conditions. As a result, his Sprott Silver Miners and Physical Silver ETF (NASDAQ: SLVR) should be a strong beneficiary. In addition to physical silver, SLVR is a pure-play silver mining ETF with significant stakes in First Majestic Silver, Silvercorp Metals, and other miners.
From a physical silver accumulation perspective, Sprott Physical Silver Trust (NYSE: PSLV) ramped up its inventory to 216.93 oz. as of February, adding 7 million oz. in January alone. This was the start of its expanded at-the-market (ATM) equity program allocation up to $2 billion, with all proceeds dedicated exclusively to buying more London Good Delivery bars. These bars are sourced primarily from global available supply (often London vaults) and locked away long-term in the Royal Canadian Mint. None of it is lent out or returned to Comex or SHFE pools. PSLV is currently the second largest silver holding ETF in the market behind SLV.
Sprott is still buying silver. If he’s putting his money where his mouth and his billions are, then perhaps that’s a sign that, even if he is overestimating a 40X gain, half of that is more than fine for 99% of investors.
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Source: “AOL Money”
