Silver hits new high. Is the shortage Real?

Silver at $90: There Is No Silver Shortage

Silver has just crossed $90 an ounce for the first time in history. This is being framed variously as evidence of re-monetization, speculative mania, or an impending physical shortage. To understand what’s actually happening, we need to step away from narratives and look at the data.

The short answer—uncomfortable as it may be—is that silver is not rare. In fact, for most of human history, it has existed in a state of persistent oversupply. “(USGS historical reconstructions place cumulative global silver mine production at roughly 55–60 billion ounces.)

Meaningful industrial consumption of silver did not begin until the early 20th century. According to Silver Institute historical surveys, pre-1930 industrial usage was modest relative to mine supply, accelerating materially only with photography mid-century and electronics decades later.

The obvious question is: has modern industry consumed that silver?

A simple mass-balance check answers this decisively.

Silver Mass Balance Since ~1930

Figures rounded; intended to illustrate order-of-magnitude constraints based on Silver Institute, USGS, and industry historical averages rather than precise inventory accounting.

Even under conservative assumptions, post-1930 industrial activity added tens of billions of ounces to above-ground silver inventories. The idea that modern industry has “used up” historical silver stocks does not survive even a cursory quantitative check.

Silver has always been plentiful.

This persistent abundance explains why there has historically been little incentive to develop primary silver mines. Hundreds of known deposits exist, but most remain undeveloped because silver was uneconomic below ~$20/oz. As a result, the majority of silver production today is recovered as a by-product of copper, lead, and zinc mining.

Industry disclosures confirm this. All-in sustaining costs across major producers—Fresnillo, Pan American, Hecla—generally cluster in the $12–22/oz range, often lower once by-product credits are applied. Under normal conditions, prices at 4–5× marginal cost would attract overwhelming supply. Yet here we are. (Based on reported AISC figures from Fresnillo, Pan American Silver, and Hecla Mining filings, 2015–2024.)

To understand why, we need to clarify a basic but rarely asked question:

What does “silver at $90/oz” actually mean?

It does not mean that the element silver is worth $90 per ounce.

Just last week, I sold silver to a refiner where I hold an account. Standard marketable bars—1 oz, 5 oz, 10 oz, 100 oz—cleared at spot. But 20 oz bars? Paid at 85%. High-purity scrap? 85%. Sterling silver objects? Melt value at best.

The metal was identical. The discount existed solely because those forms were not immediately marketable products. To the refiner, they required melting and refabrication into standardized units.

The reference price used to determine payment was COMEX.

And this is the critical point: COMEX is not a price for silver. It is a price for a specific product made out of silver.

Under CME Rulebook Chapter 112, a COMEX silver futures contract represents 5,000 troy ounces, deliverable only as five ~1,000 oz bars (±10%), minimum 999 fineness, from approved refiners, held in approved warehouses.

So the quoted $90/oz price is actually a price for 1/1000th of a COMEX-approved bar, in a specific location, under specific contractual conditions.

The shortage, therefore, is not silver.

It is a shortage of a very specific fabricated product.

This distinction matters because deliverable inventory is tiny relative to paper claims:

Open interest data from CFTC/CME; registered inventory from CME daily warehouse reports.

These figures are not evidence of a silver shortage. They are evidence of product specificity.

There is ample silver outside the COMEX system—in coins, bars, jewelry, scrap, and hoards—but only a narrow slice qualifies as deliverable inventory at any given moment.

The market for elemental silver is diffuse and opaque. The market for silver futures is centralized, transparent, and small.

Even at $90/oz, total annual mine supply represents roughly $80–90 billion in market value—smaller than many single-company equities. Yet that entire market references a futures venue requiring only $6–7 billion in margin capital. Initial margin requirements for COMEX silver futures typically range from roughly 8–12% of notional value, depending on volatility

In effect, a few billion dollars of leveraged positioning establishes the reference price for nearly a trillion dollars’ worth of silver—not because the metal is scarce, but because price discovery is concentrated in a narrow financial instrument tied to a single deliverable product.

Silver has always been mined and hoarded. Consumptive uses remained minimal until the 20th century, and even today industrial demand consumes well under half of annual mine supply. As a conductor, silver invites thrifting, substitution, and recovery—limiting sustained demand pressure. (Silver Institute data shows industrial demand typically accounting for ~45–50% of annual mine supply in recent years.)

What does become scarce are COMEX-eligible bars.

Fabricating 1,000 oz bars of high purity, certifying them, and delivering them to approved warehouses creates a real bottleneck. These facilities are capital-intensive, tightly regulated, and calibrated to normal demand—not speculative surges. Refiners have no incentive to maintain surplus capacity for moments like this.

Because silver has been oversupplied for most of history, very little capital has flowed into new primary mine development. Known deposits remain undeveloped due to long lead times and the widely understood transience of high prices.

Yes, $90 is a high-water mark. If you bought under $20 and sold here, you did extraordinarily well. But expecting prices like this to persist requires either sustained monetary inflation or a structural shift far larger than a COMEX bottleneck.

From refiner flows alone, it’s clear metal is pouring back into the system, much of it destined for refabrication into deliverable bars. How long that process takes is uncertain—but capacity is expanding as fast as economics allow.

As for central banks: they want nothing to do with silver.

Bimetallism has been an expensive failure for over a millennium. Silver was formally demonetized in the late 19th century, after repeated attempts to maintain a gold-silver peg collapsed. At its peak, U.S. government silver stockpiles exceeded 3 billion ounces. “(U.S. Treasury historical records, mid-20th century.) Liquidating that position took decades and imposed a multi-generational ceiling on prices. Official selling began in the 1970s and ended in the early 2000s.

As for me? I sold my silver around $80, most of it purchased below $20. It’s fascinating to watch, but unless you’re holding COMEX-eligible bars in a COMEX warehouse, you’re trading derivatives of derivatives. How long liquidity holds—and at what price—is unknowable.

One final note, to be expanded later: while U.S. debt levels are high and the dollar continues to lose purchasing power, the dollar standard is not in jeopardy. Not remotely. That claim can be demonstrated with data, and I will address it directly in future work.

Good luck.
@rawbooty2

P.S. If you want to learn more about the U.S. government defending the silver peg, research the following:

• Coinage Act of 1792

• Coinage Act of 1834 (and 1837 amendments)

• Bland–Allison Act (1878)

• Sherman Silver Purchase Act (1890)

• Pittman Act (1918)

• Silver Purchase Act (1934)

• Coinage Act of 1963