Gold and Silver Deliveries Escalate – A Warning for Currencies?

Global silver supply is in severe deficit for its 6th consecutive year with cumulative shortage expected to reach 866 million oz. by end of 2026, driven by explosive demand from AI data centers, EVs, solar panels, and emerging technologies, compounded by China’s control of 70% of global silver bullion supply and recent US designation of silver as a critical mineral.

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Historically, the concept of paper currency was invented in 7th Century Tang Dynasty China. These initial promissory notes lasted until 1023, when Emperor Renzong decreed the first government-issued paper money during the Sung Dynasty. Merchants and traders who often needed to travel great distances found that transporting large amounts of precious metals posed excessive risks for loss or robbery, not to mention the costs of armed guards. Ironically. Chinese investors are now paying double-digit premiums for physical spot silver over futures market quotes, due to lapsed confidence in reliable future delivery.

While both gold and silver markets are now in backwardation due to exacerbated physical delivery demand, silver’s underlying rationale is unique and rapidly depleting in supply as demand is now skyrocketing. As a result, silver mining companies like Endeavor Silver Corp. (NYSE: EXK) and silver mining ETFs like iShares MSCI Global Silver and Metal Miners ETF (CBOE: SLVP) and Amplify Junior Silver Miners ETF (NYSE: SILJ) might need to be recategorized, as physical silver demand is now encroaching on currency at the retail level. 21st century technology’s increasing dependence on strategic rare earth minerals and contemporary mining processes will only enhance the value of these mining companies further.

Backwardation Underpinnings Spreading Globally

Skyrocketing demand for physical silver spot delivery is causing futures market backwardation.

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Backwardation in commodity futures markets occurs when buyers are prepared to pay higher near-term spot rates over long-term rates due to lack of confidence in future delivery. This is similar to an inverse yield curve in bonds. The huge price spike in silver that began in 2025 is an indication that buyers are aware of the silver supply shortage and mistrust the reliability of the futures exchange markets to honor their settlement protocols in product, rather than in cash, which may be worth considerably less.

Silver’s superior electrical conductivity and other properties have made it an irreplaceably essential component for virtually every technology of the modern age. Every A.I. data center, EV, smartphone, flatscreen TV, solar panel, radar system, drone, missile, heart defibrillator, etc. requires some silver in its design. New technologies, such as humanoid robots, are expected to deepen demand significantly over the next decade.

Halfway through its 6th consecutive year of production shortfall vs. demand, the cumulative global silver deficit, which began in 2021, is expected to reach 866 million oz. by the end of 2026. However, additional factors are escalating demand even faster and further, deepening the backwardation ratio:.

The US declared silver a Critical Mineral and strategic asset at the end of 2025.

China controls 70% of current global silver bullion supply and controls 40% of the global sulfuric acid supply, which is essential for silver ore extraction from mining operations. It added silver to its rare earth minerals list, making its export extremely limited.

Central Banks around the world are accumulating and hoarding physical gold and silver at a huge pace - China has acquired 800 MT of silver during Q1 2026 alone.

Inflation, the Iran War, European migrant triggered geopolitical instability, and a host of other international events are overhanging concerns.

Silver Buying at the Retail Level

Retail silver purchases have passed beyond jewelry to actual investment status.

A recent USA Today article actually went into the details of researching, purchasing and owning silver coins and bars on a retail basis. No longer viewed solely as merely a cheaper alternative to gold for jewelry or as a decorative dinnerware material, physical silver’s profile has now expanded to that of a legitimate store of wealth with upside investment potential, and being promoted in mainstream media.

The backwardation trigger of October 2025 that actually put the LBMA in danger of a default was due to retail and wholesale silver purchases by Indian Diwali celebrants. Western futures exchanges were designed primarily to handle bookkeeping transactions for commodity producer hedging and futures speculators. Historically, LBMA and COMEX usually only need to deliver less than 10% on overall monthly contracts, which usually expire or settle electronically on ledger.

Continued outflows of registered silver from COMEX has grown so extreme that the System Integrity through Licensed Vault Expansion and Resilience (SILVER) Act (H.R. 8007) has been introduced in Congress to help COMEX handle physical delivery demands. However, more extreme measures are being speculated, such as:

The COMEX may declare a force majeure on futures contracts and deploy systemic changes to restore trust in the exchanges.

Gold and Silver may be used to back future US Treasury Bonds - something that Treasury Secretary Scott Bessent has mentioned in interviews in the past.

A potential replacement of the US Federal Reserve Note with a US Treasury Note that would be backed by gold, silver, and oil to replace fiat currency. Proposed by economist Judy Shelton, who advised President Trump on his “return to the gold standard” proposal during his 2016 presidential campaign, such a move would not only eliminate inflation caused by overprinting of money by the Federal Reserve, but could also eliminate counterfeit and illicitly acquired greenbacks derived from drug smuggling, human trafficking, and illegal arms deals.

Rock Beats Paper: Silver Is Mined, Not Printed

Silver's inclusion as a US national security strategic asset has elevated its demand as its scarcity increases.

With gold projected to go to over $6,000oz. by JP Morgan and Wells Fargo and silver to climb to $309oz. by Bank of America, the confidence in the paper futures markets is dwindling. May Open Interest is at a record low (under 100,000 contracts at the time of this writing) and silver continually leaves the vaults, leaving ongoing looming physical metal settlement default concerns.

During the Great Depression, President Franklin D. Roosevelt outlawed the ownership of physical gold The move was designed to prop up the stock market and banks, and created an artificial dollar conversion price of gold at $35oz. In spite of this, gold mining companies, such as Homestake Mining, rose 474%. This ban lasted until the 1970s, at which point gold shot up to $800oz. and silver went from $1.50 to $50oz.

It’s now an open secret that the futures markets have been artificially suppressing silver prices in defiance of the supply and demand disparity. The fact that Chinese buyers are paying over 11% premiums on the silver spot market over futures quotes demonstrates that paper futures have diminished in credibility and that physical silver allure is elevating. As such, the source of silver, which is mining, may need to undergo a reassessment.

Canadian headquartered Endeavor Silver Corp. acquires, develops, explores, extracts, refines, and reclaims silver in the Americas. The company just posted Q1 2026 EPS of $0.21 vs. consensus estimates of $.01 (+110%) and $209.7 million revenues (+34.62% over estimates). Revised analyst projections now see EXK stock going from its current $10-$11 range to a $16-$20 price.

Investors who are watching silver might ponder that controlling the source of a commodity might return better and more reliable gains that ETFs that simply stockpile refined bullion after the fact. Central banks, on behalf of their governments, will likely have national security-based dibs on future supplies over industrial, medical or financial institutional buyers. Bearing that in mind, SLVP and SILJ might be more attractive ETFs for silver exposure. After all, if SLV or other stockpiling ETFs can’t get additional inventory, it’s the mining companies who will be setting the future value of silver under a more transparent supply and demand market.

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