Recently, the white metal market has been extremely hot, with gains that are hard to keep up with. But if you think this is just a factory suddenly starting to hoard silver jewelry, then you're oversimplifying things. The truth is actually more interesting — it's a "mismatch" between supply and demand in the financial markets.

On the surface, global silver isn't scarce at all. The annual global output is 27,000 tons, with industrial consumption accounting for 23,000 tons. Logically, silver is like salt in a supermarket — plenty of supply.

But this logic has completely collapsed in the futures market.

What is the awkward reality? The actual silver inventories that can be delivered at any time are shockingly small:
- COMEX actual inventory is only 14,000 tons
- London inventories are less than 4,000 tons
- China’s inventory is only 715 tons

Together, these inventories can't even cover a month and a half of global industrial demand.

And here’s the problem — what are the big players in the futures market doing? They have sold short contracts that are several times the size of these inventories. Imagine a concert with only 1,000 seats but selling 5,000 tickets — when everyone shows up with tickets, the show begins.

These short contracts seem like "guaranteed delivery" promises, but in reality? Most traders don't actually want to receive several tons of silver. Where would they put it? It’s not like they have mines at home. So the traditional approach is to close the position before expiry or settle in cash, covering the price difference — no one actually moves physical silver.

This system works smoothly until recently, when some long positions suddenly changed the game. They stopped playing by the usual rules and started demanding physical delivery — forcing shorts to buy on the market. With inventories so tight, the procurement costs immediately soared.

The mismatch between inventories and derivatives markets can easily trigger "short squeeze" scenarios in any commodity. Silver has hit that point this time, creating enormous tension between futures pricing power and physical scarcity. Whether you're an investor or just observing the market, you should understand the mechanism behind this — this is not just a silver story, but a microcosm of how derivatives markets can become disconnected from the spot market.