Silver's Supply Gap Shrinks Just as Chinese Buyers Step In
Published on 10/27/2026 at 11:51 | Editorial boerse-global.de
Silver's latest slide has run into a counterweight from the physical market, where Chinese stockpiles are shrinking even as futures traders bail out. The metal's front-month COMEX contract settled yesterday at $54.04 an ounce, a gain of just 0.1% that counts as a modest stabilization rather than a genuine turn in sentiment.
The pressure has been building for days. Higher oil prices have stoked US inflation worries, feeding expectations that US interest rates will stay elevated for longer, while speculative positions continue to unwind. On Friday, silver closed at $53.96 an ounce — its weakest level since November 2025 — before Reuters reported a rebound yesterday, helped along by falling crude prices.
A Fed Meeting With Limited Room to Soothe
The Federal Reserve's policy meeting opened today, with the rate decision due tomorrow. Several central bank officials had previously described an October hike as unlikely, according to media reports. That makes the statement itself only part of the story: expectations for the dollar and bond yields that follow from it could set the next direction for the metal.
An unchanged decision would not, on its own, erase the drag from inflation or from softer industrial consumption. That distinction matters for anyone hoping the Fed alone can reset the market.
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Chinese Buyers Pounce on the Dip
In the physical arena, lower prices are already drawing out demand. Chinese silver social inventories tracked by Shanghai Metals Market fell to 3,833.92 tonnes in the weekly report published Thursday, down 75 tonnes from the prior survey. SMM attributed the drawdown mainly to stepped-up buying at cheaper levels, with seasonal jewelry demand in Shenzhen adding support.
Trade flows point the same way. In September, exports of unwrought silver in the tracked purity category fell from August while imports rose — though China remained a net exporter of that product, so the shift does not amount to a broad shortage.
Two Very Different Deficit Numbers
How tight the market really is depends heavily on whom you ask. HSBC's assessment, released yesterday, projects a silver market deficit of 5 million ounces for 2026. The Silver Institute, by contrast, forecast 46.3 million ounces in April. Both assume supply will fall short of demand, but the gap between them is enormous — and a much smaller shortfall would undercut the case for pronounced scarcity.
The CME Group weighed in on October 20, citing a projected 2026 global supply gap of 46.3 million ounces while flagging rising inventories and weaker industrial demand from the solar sector as near-term offsets. That combination explains why a forecast deficit does not automatically translate into higher prices: available stock and shifts in consumption can overwhelm the arithmetic.
UBS Sticks to Its Targets
UBS is not budging. In a note published Sunday, the bank reiterated a forecast of $70.00 an ounce by December this year, $75.00 by mid-next year and $80.00 by September next year — the last figure appearing in a separate weekend assessment that set the same $80 target for September 2027. UBS expects 2026 to bring the sixth consecutive annual market deficit and points to gold as a support for silver, while acknowledging substitution and thrifting in photovoltaics.
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Mine supply offers its own counterweight. Fresnillo reported attributable silver production of 10.3 million ounces for the third quarter on October 21, down 11.6% year on year, citing lower ore grades and the end of the Silverstream contribution. The miner reaffirmed 2026 output guidance of 42.0 to 46.5 million ounces.
For investors, the market now splits along two horizons. Near term, the Fed decision and rate expectations dominate. Longer out, the question is which of the widely diverging deficit forecasts proves right — and whether Chinese bargain hunting and weaker mine output can outweigh the forces still pressing prices lower.
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