Just last week silver hit new highs as the precious metal breached the $84/oz mark. This has happened as the supply of silver becomes even more important to businesses. At the same time, those seeking a safe haven have also been getting involved.
On Tuesday this week, the Chicago Mercantile Exchange (or CME) raised the margins for gold and silver again. Interestingly, the raise happened following one from the previous day (Monday). This move by CME has helped stabilize the price of silver. However, many commentators on X and other social media platforms have suggested that while virtual silver may have stabilized, the cost of physical silver has done the opposite.
As of the first day of the year Beijing’s new export-licensing system has kicked in too. These restrictions further lower the supply to U.S. manufacturing. Commentators have pointed to the “Shanghai premium” which is because of the increasing demand for critical minerals. It can also add up to 10 percent to the price of silver.
Social media has been full of posts related to the topic. Legacy media has also stepped up its reporting of the problem. One thing that is constant in all the posts on social media is how there are banks getting burnt by the price fluctuations. Legacy media has not highlighted this problem though. Yet.
Physical vs. Paper Divergence: Premiums and Availability
You can’t just buy physical silver at face value in many places today. Many social media posts have reported a large difference in price. One user called @barkmeta has suggested that in Japan an ounce of silver isn’t $71, but $130. In China this number is $110.
The same user suggests that the real price of silver will increase once banks close their short positions against the precious metal. Another user, @fxevolution, suggested that this difference in paper vs physical price might be one of the craziest things in finance we actually see in 2026.
Several users have also highlighted a bigger problem that may affect Citi and Bank of America. One post viewed by over a million users has suggested that BofA is short 1 billion ounces of silver, and Citi is short 3.4 billion ounces. All this when the annual global production of silver is over 800 million ounces. Which includes all the solar panels, electronics, jewelry, as well as bars and coins.
The problem is that a large investor in silver may have asked for physical silver instead of just paper. If that is the case, which some assume is, then the banks have sold over 5 times the annual planetary output of silver. Confused?
While unverified, these claims illustrate the hype. With the problem being global, things are not as easy to decipher. Here are some things that help clarify the situation:
Major online dealers like SD Bullion, JM Bullion, and APMEX have seen kilo silver bars and other popular items (e.g., common rounds and monster boxes) selling quickly, with reports of up to 3-4 week delivery delays on remaining products.
UK dealers reported “out of stock” notices on popular coins like Silver Britannias, with delays of 2-3 weeks from mints due to demand.
Anecdotal reports from users and smaller dealers (e.g., in Australia and local shops) indicate entire cities or regions running low, with pawn shops and bullion stores having little to no silver available.
Wholesalers and refiners have paused purchases or reported backlogs, exacerbating retail shortages.
Market Mechanics and Risks
Silver operates in two interconnected but increasingly distinct worlds: the paper market (primarily COMEX in New York and LBMA in London, dominated by futures contracts and financial settlement) and the physical/regional markets (e.g., Shanghai Gold Exchange/SGE in China, where delivery is more direct and tied to industrial needs).
As of early January 2026, spot silver trades around $74–75/oz on COMEX (up ~3–4% on reopening after the holiday pullback from ~$84 peak in late 2025). However, physical premiums in Eastern markets remain elevated. Shanghai prices closed late December at ~$78–80/oz equivalents, reflecting a persistent $5–8/oz premium over Western benchmarks. This divergence highlights growing stress.
Decoupling in stress becomes evident in backwardation (near-term prices higher than future ones), signaling immediate physical scarcity. COMEX futures show mild backwardation into early contracts, but Shanghai has led with sharper inversions, often setting the effective global floor for deliverable metal.
Risks include rising delivery demands, which could widen premiums further, leading to fragmented pricing. For instance, Asian buyers paying $80+/oz while Western paper trades lower. This erodes COMEX/LBMA as sole benchmarks, potentially forcing arbitrage flows or vault drains. Extreme cases risk “force majeure” declarations if exchanges can’t deliver.
Yet exchanges maintain tools to manage chaos: CME’s Rule 589 allows dynamic price bands, trading halts, expanded limits, or emergency cash settlements during volatility spikes (as seen with recent margin hikes calming late-2025 leverage). These prevent total breakdowns but can exacerbate short-term corrections.
Outlook: Fundamentals stay strongly bullish. Another structural deficit projected for 2026 (Silver Institute/Metals Focus estimate between 95 and 200 million oz shortfall, sixth straight year), driven by industrial growth outpacing mine supply.
What about the Banks?
Viral posts still accuse JP Morgan of ongoing manipulation/suppression (e.g., “infinite money glitch” via spoofing, tying Fed repos to covering shorts). These echo 2020-era narratives but ignore the flip. However, if JP Morgan were blowing up on shorts, markets/systemic signals (e.g., stock plunge, clearing alerts) would scream it. Instead, JP Morgan is benefitting from higher prices.
Citi has significant derivatives books (second to JP Morgan in precious metals notionals), but there is still no credible evidence of distress-specific silver shorts causing margin calls or blowups. Fed repo spikes (~$74B year-end) are routine liquidity (year-end window dressing), not confirmed “bailouts.”
When looking at HSBC, there is no clear evidence of HSBC-specific distress: No margin call failures, regulatory interventions, or stock plunges tied to silver (HSBC shares stable/rose into early 2026 amid broader banking).
At the same time, HSBC continues to participate actively in the precious metals market without any public signs of distress related to silver positions.
How the Silver Surge is Playing Out
The silver surge of late 2025 and early 2026 has certainly captured the imagination of investors and social media alike. However, the persistent rumors of impending bank collapses remain just that. Rumors.
Banks like JP Morgan have adeptly navigated the market by flipping to net long positions, profiting from the rally rather than suffering from it, and even institutions with lingering shorts, such as Citi and HSBC, show no verifiable signs of systemic distress amid routine Fed operations and exchange safeguards.
The real story lies in the fundamentals: industrial demand outstripping supply, exacerbated by China’s export restrictions, creating a structural bull case that could sustain elevated prices without needing a dramatic “squeeze” narrative.
As we move deeper into 2026, investors would be wise to approach hype with discernment. Verify claims beyond viral X posts, diversify information sources, and remember that parabolic moves like silver’s 150%+ gain often invite sharp corrections. That said, the outlook remains compelling for those with a long-term view, with analysts projecting averages around $55–65/oz but potential upside to $80–100+ if deficits deepen.
Keep an eye on what is happening in China. The country was responsible for mining over 100 million ounces of silver in 2023. Other leading mining countries include Mexico and Peru, together the three countries are responsible for 50 percent of global mining output annually.
Author: Andy Samu
The editorial team at #DisruptionBanking has taken all precautions to ensure that no persons or organizations have been adversely affected or offered any sort of financial advice in this article. This article is most definitely not financial advice.
See Also:
The Banks and the Silver Surge: Rumors vs. Reality | Disruption Banking
