Key Takeaways
- 1COMEX is the world's largest futures exchange for precious metals, setting global prices.
- 2COMEX registered silver (available for delivery) has declined by over 70% since 2021.
- 3Registered silver represents metal that contract holders can take physical delivery of.
- 4Eligible silver is stored at COMEX but not available for futures delivery without conversion.
- 5When registered inventory drops too low, delivery failures and price spikes become possible.
- 6Investors taking physical delivery ("draining COMEX") put pressure on the paper market.
- 7The COMEX inventory drawdown signals genuine physical demand exceeding available supply.
COMEX (Commodity Exchange Inc., now part of CME Group) is the world's largest precious metals futures exchange. When people talk about the "spot price" of silver, they're usually referring to prices derived from COMEX futures contracts.
But here's what most investors don't realize: COMEX doesn't just trade paper contracts. It stores actual physical silver in approved vaults across New York. This inventory is crucial because it's what backs the futures market and enables physical delivery.
In recent years, that inventory has been shrinking dramatically. Registered silver—the portion available for delivery—has dropped over 70% from its 2021 highs. This "vault drain" is one of the most important developments in the silver market.
Registered vs Eligible Silver
COMEX silver inventory is divided into two categories, and understanding the difference is crucial:
Registered Silver
Silver with warrants attached, available for delivery against futures contracts. This is the "real" inventory that backs the market.
- Has attached warrant (delivery certificate)
- Can be demanded by long contract holders
- This is what matters for delivery
Eligible Silver
Silver that meets COMEX standards but isn't available for delivery. It's just stored there by private parties.
- No warrant attached
- Cannot be delivered until converted
- May belong to ETFs, dealers, or private storage
The Eligible Trap
Current Inventory Levels
The numbers tell a stark story. COMEX registered silver has plummeted:
COMEX Registered Silver Decline
Registered inventory has declined over 80% from its 2021 peak. This represents genuine physical demand.
To put this in perspective: 28 million ounces of silver is worth roughly $900 million at current prices. That's the entire deliverable inventory backing billions of dollars in paper contracts.
Historical Drawdowns
The current inventory decline is unprecedented in COMEX history. Previous drawdowns were smaller and shorter:
- 2011 Silver spike: Inventory dropped ~30% as silver hit $50/oz, then rebounded
- 2015-2016: Modest decline during commodity bear market
- 2020 pandemic: Brief dip during supply chain disruptions
- 2021-present: Sustained 80%+ decline with no reversal in sight
What makes this drawdown different is its persistence. Previous inventory drops reversed when prices rose or physical demand eased. This time, the decline has continued through multiple years and various market conditions.
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Get Your Free MatchHow COMEX Delivery Works
Understanding delivery mechanics reveals why inventory matters so much:
- Futures contract: Each COMEX silver contract represents 5,000 oz of silver
- Settlement options: Most contracts settle in cash; only a small percentage take delivery
- Delivery notice: During delivery month, long holders can demand physical silver
- Warrant assignment: COMEX assigns warrants from registered inventory to satisfy delivery
- Physical transfer: The buyer now owns specific bars in the vault (or can remove them)
The key insight: if more people demand delivery than there is registered silver, the system breaks. COMEX relies on most traders rolling contracts forward rather than taking physical metal.
The Leverage Problem
Open interest (outstanding contracts) often represents 10-20x the available registered inventory:
If even 5% of contract holders demanded delivery simultaneously, COMEX couldn't fulfill all requests.
What Depletion Means for Investors
If COMEX registered inventory continues declining, several outcomes become increasingly likely:
Scenario 1: Conversion from Eligible
Owners of eligible silver may convert to registered if premiums rise enough. This buys time but doesn't solve the fundamental demand issue.
Scenario 2: Price Spike
Higher prices incentivize holders to deposit more silver and reduce industrial/investment demand. The market balances through price discovery.
Scenario 3: Delivery Failure
If delivery requests exceed available metal, COMEX may force cash settlement at potentially unfavorable rates. This would destroy confidence in paper silver markets.
Scenario 4: Paper/Physical Disconnect
Physical silver prices could decouple from futures prices, with significant premiums for actual metal. We saw hints of this in 2020 and 2021.
For investors, the message is clear: holding paper claims on silver is not the same as owning physical metal. In a supply crisis, only physical holders are guaranteed to have silver.
Related reading: Silver Supply Deficit Analysis and Silver Backwardation Explained
How to Track COMEX Data
Investors can monitor COMEX inventory through several sources:
- CME Group website: Official daily reports on registered and eligible inventory
- Gold/silver data sites: Many precious metals websites chart COMEX data
- Twitter/X analysts: Several traders post daily COMEX updates
- Commitment of Traders (COT): Weekly CFTC reports show positioning
Key Metrics to Watch
- Registered ounces: The deliverable inventory number
- Daily change: Track whether inventory is rising or falling
- Registered/Open Interest ratio: How many contracts each ounce must cover
- Delivery month activity: Actual delivery requests during contract expiry
Frequently Asked Questions
What is COMEX silver inventory?
COMEX silver inventory refers to physical silver stored in COMEX-approved vaults that backs futures contracts. It's divided into "registered" silver (available for delivery) and "eligible" silver (meets standards but isn't available for delivery). Total COMEX inventory represents a portion of global above-ground silver.
What is the difference between registered and eligible silver?
Registered silver has warrants attached and can be delivered against futures contracts. Eligible silver meets COMEX standards for purity and bar weight but lacks warrants, so it cannot be delivered until converted. Owners must pay fees to convert eligible to registered status.
Why is COMEX inventory declining?
COMEX silver inventory is declining because more investors are taking physical delivery of their contracts rather than rolling them forward. This "drain COMEX" movement, combined with industrial demand exceeding mining supply, is reducing available silver in the vaults.
What happens if COMEX runs out of silver?
If COMEX registered inventory drops to critical levels, the exchange could face delivery failures. This would likely trigger a massive disconnect between paper and physical silver prices, potentially causing silver spot prices to spike dramatically as the market reprices to reflect physical scarcity.
How can I track COMEX silver inventory?
COMEX publishes daily inventory reports on the CME Group website. Many financial websites and precious metals analysts also track and chart this data. Key metrics to watch include total registered ounces, daily changes, and the ratio of registered to open interest.
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Thomas Richardson
Former wealth manager turned Gold IRA researcher. After 20 years in finance, I got tired of watching scammers prey on retirees. Now I investigate companies and publish what I find—good or bad.