London’s silver space is running out

27,065 tons in the London vaults seems a large number. The World Silver Survey 2026 has just confirmed that this is not the case.

In October 2025, silver lease rates (the cost to borrow physical silver for short terms) surged to a level of nearly 39%, the highest on record. The normal rate is below 1%. A market that, to all appearances, had been feeling well supplied for years suddenly became one from which it seemed impossible to obtain the metal. This decline lasted for several weeks, causing silver to reach an all-time high of $121.67 in January 2026, and then declined as metals flowed back from New York to London.

The World Silver Survey 2026, released on April 15, provides the most authoritative account of what actually happened and why it matters that the conditions that caused it have not fundamentally changed.

I have covered stagflation data First article of this issueAnd COMEX delivery time has arrived Second. This article covers a third force: the physical silver market in London, and why the most authoritative annual data source on the silver market describes the current environment as “the era of virtually unlimited silver liquidity is gone.”

This week’s premium features eight deep dives silver catalyst issue, and in this article, I will focus on one of them.

The COMEX sets the price. London Moves the Metal.

To understand why the London Vault level matters to silver investors, it helps to understand what London actually means in this market.

The COMEX in New York is the primary futures exchange: where price discovery occurs, where traders go long and short, where the price of paper is determined. The LBMA in London is the primary physical OTC market: where silver is actually moved between banks, refiners, ETPs, industrial users, and sovereign entities. The two markets are connected but distinct. The COMEX plays a central role in price discovery, while London is the primary hub for physical OTC transactions.

When available London physical inventories tighten, the ability of market participants to obtain metal at short notice is reduced. Increase in lease rates. The gap between the paper price and the cost to actually acquire physical silver continues to grow. That is not a theoretical dynamic; This is what happened in October 2025, and the World Silver Survey 2026 now gives us a fuller picture of how thin the market had become before then.

What the World Silver Survey 2026 confirms

The WSS 2026 documents show that by the end of September 2025, silver physically available for day-to-day OTC operations and lease in London (“free float”: not allocated to ETPs, not backed by structured products) had fallen to projected levels. ~136 socks (A record low was reported as per WSS 2026) (4,234 tonnes).

Getting that number right requires context. Daily OTC trading turnover in the London market was almost average 450 kilos per day in 2025, according to LBMA data cited in the World Silver Survey 2026. It reflects aggregate trading activity, not physical settlement volumes. Free float was less than a third of an average day’s trading turnover, although this compares a stock to flows – the point is that the available buffer was very small relative to normal market activity.

This pressure arose due to increase in Indian demand in October. WSS 2026 describes it perfectly: “The squeeze that ensued became self-fulfilling, as shorts had to be covered and forced to pay unprecedented rates for near-term liquidity. A market that had felt well supplied a year earlier had become a market where it seemed impossible to source the metal.”

What caused the free float to shrink so dramatically before October? Three forces are gathering together:

First, the global deficit. The above ground stock continued to decline due to demand exceeding supply for five consecutive years. WSS 2026 confirms a reduction of 40.3 Moz in 2025, the fifth consecutive reduction.

Second, tariff-driven arbitrage. The CME vault in London saw nearly 225 months of inflows between December 2024 and the beginning of October 2025 due to concerns about potential US tariffs on silver. The London pool shrank as New York grew.

Third, ETP growth. Strong inflows into silver ETPs meant that a large portion of London’s headline inventory was allocated and out of reach. By the end of September 2025, physically backed products accounted for 83% of London’s reserves, leaving only 17% actually available for market operations.

where things stand now

The intense tension of October has passed. The metal flowed back to London; Lease rates have fallen from their 39% peak to around 2-3% by the middle of Q1 2026, and have declined since then. WSS 2026 notes that at the time of writing the market “seems similar to historical norms”.

LBMA Vault data for February 2026, the latest snapshot available, shows total London holdings 27,065 tonnes (870 mos)Down from 894.4 moz at end-2025. Non-ETP shares have reached almost 24% of London holdings, well up from the 17% that started October’s decline.

Source: LBMA – London Vault data, as of February 2026 | Silver Institute / Metals Focus – World Silver Survey 2026 | investment.com — Silver Lease Rates October 9, 2025 (widely reported ~39%) | White and Case – Section 232 Deadline Analysis

WSS’s own assessment of 2026 is worth quoting directly in its essence: The market has clearly entered an era of short stocks. Tightness will not be constant, but liquidity will generally be lower, lease rates will be more volatile, and price fluctuations are likely to be larger than investors are accustomed to.

Importantly, the structural conditions that made October possible (persistent deficits dragging down global equities, ETP growth locking up a large portion of London’s inventory, and a tariff threat that could restart New York arbitrage at any time) have not been resolved.

july 13th risk

One forward-looking factor covered by the newsletter in this issue deserves mention here: The Section 232 bilateral agreement deadline is July 13, 2026, which is a 180-day period from the January 14 critical minerals proclamation. If negotiations are deemed inadequate, new tariffs on silver imports become the default outcome.

WSS 2026 confirms that tariff fears drove London-to-New York arbitrage from Q4 2024 to October 2025, dropping London’s free float to a record low. London is already down 24% from its 2020 peak. The second arbitrage-driven drain reaching this lower starting level would face a much thinner buffer than in October 2025.

it connects directly Trigger #58: London Bullion Market Stress Indicator From the “Silver Rising”, which identified a combination of declines in London inventories, increases in ETP allocations and exposure to external shocks as mechanisms of acute physical market stress. October 2025 was the first activation. WSS 2026 confirms that the underlying conditions are structurally present.

outlook

On April 23, silver was trading near $78.10, about 36% below its January 29 all-time high of $121.67. The Hormuz blockade remains in place; Iran has said it will not reopen the strait while the US Navy continues to intercept ships, although ceasefire talks continue.

London’s physical market is not under great stress today. WSS 2026 confirms that conditions have returned to normal from October. But generalized doesn’t mean a solution. The projected sixth-year deficit of 46.3 Moz for 2026 continues to drain global inventory buffers. The free float share, at 24%, is above the October trigger level, although the trigger level itself is not a fixed number. It depends on demand. Reactivation of tariff-driven arbitrage, or another surge in Indian physical demand, or both, could compress it faster than current market prices.

full silver catalyst Issue #13 also includes seven more deep dives: the stagflation thesis confirmed at 3.3% in March CPI, the Hormuz blockade and the new mining cost floor it creates, the COMEX inventory situation with a first notice day for May deliveries, 64% semiconductor revenue growth and its implications for industrial silver, the Section 301 trade investigation and tariff risks to Mexico’s 185-200 moj annual supply, Samsung The solid-state battery commercial deployment timeline, and the delayed Fed confirmation and fiscal dominance argue for why this inflation is structurally difficult to control. For anyone tracking Silver performance throughout 2026 As these dynamics develop, I encourage you to Get “Silver Rising” with two weeks of free access to the Silver Catalyst newsletter.

Thank you.

silver engineer