A major silver supply crunch may be building in the market. Felix Prehn, founder of Goat Academy, explains that the key issue is the gap between paper silver and physical silver.
To understand the story, it helps to know what COMEX is. COMEX is a large commodities exchange in the United States where metals like silver are traded. Much of the trading happens through futures contracts. A futures contract is an agreement to buy or sell something later at a set price. Many traders never plan to touch real silver. They trade the contract and settle in cash.
COMEX reports two main silver categories in its vaults:
- Registered silver: silver that is available for delivery. This is the silver that can be handed over when someone demands metal.
- Eligible silver: silver stored in the vault, but owned by someone else. It is not for delivery unless the owner chooses to move it.
This difference matters because the registered number is the “ready to deliver” supply. In the transcript, registered silver is described as far lower than total vault inventory. At the same time, there are far more open contracts than registered metal.
Another key signal is the silver lease rate. This is the interest rate paid to borrow physical silver. When silver is easy to find, the lease rate is usually low. When the lease rate spikes, it can mean physical silver is harder to get.
February 27 is described as an important date because it is the point when contract holders must declare whether they want delivery for the March period. If many demand physical delivery at once, it can stress the system.
If stress rises, several outcomes are possible. The exchange could push cash settlement (paying cash instead of metal). It could also change rules, such as raising margin requirements. A margin requirement is the cash a trader must post to hold a contract. Raising it can force some traders to sell.
Felix Prehn’s broader point is simple: when demand for physical metal rises while deliverable supply falls, prices and market rules can shift fast. Readers who want more background on Felix Prehn’s work can review the story behind Felix Prehn Goat Academy.