Welcome back to The Deep Dive. We've got a really
fascinating one for you today. You know, usually
when we talk about precious metals, the conversation
just immediately goes to gold. Right, the safe
haven. Exactly. Gold is the celebrity of the
metal world. It's the store of value, the jewelry
on your finger, the bars in Fort Knox, and silver.
Silver is usually just, well, the runner up.
The participation trophy of commodities. Poor
man's gold. I think is the phrase people have
used for a century, right? But today we are flipping
that narrative completely upside down. We have
a stack of reports here Specifically a breaking
analysis from Doug Young. It's actually dated
for tomorrow February 20th 2026 so we are right
on the bleeding edge of this and the picture
this report paints is Well, it's tense. That's
the best word for it Yeah, if you think silver
is just about earrings and old coins you are
missing the absolute biggest story in the global
economy right now. Tense is honestly putting
it mildly. If you look at the data we have in
front of us, silver isn't really behaving like
a precious metal anymore. Not at all. It is behaving
like a strategic industrial utility, one that
is rapidly running out. It's effectively the
invisible nervous system of the modern world.
And right now that nervous system is flashing
red. So our mission for this deep dive is to
unpack this report, which is titled Physical
Demand. reshape silver market dynamics. We're
looking at a predicted deficit of 67 million
ounces for this year alone. Just this year. Which
is wild. And we need to figure out why the vaults
in New York are bleeding inventory at record
speeds and why, you know, for the first time
in a long time, the price on your screen might
not actually match the reality of getting the
metal in your hand. It's a classic collision
between physical reality and financial markets,
but there is a massive geopolitical twist to
this that we really need to dig into. Okay, let's
unpack this. Let's start with the demand side,
because I think this is where most people, myself
included, get stuck in that old jewelry mindset.
Yeah, it's the common trap. The report explicitly
calls silver a utility. Why? What is so special
about this specific element that we can't just
swap it out for something else? It honestly comes
down to physics. Pure and simple. Silver is the
single most conductive metal in existence. Period.
Period. It moves electrons better than copper,
it's better than gold, better than aluminum.
If you want to move electricity efficiently,
you want silver. So it's literally the path of
least resistance. Literally. And think about
the world you and I are living in right now.
In early 2026, everything is becoming electrified.
Right. Everything is becoming digital. And the
absolute backbone of that transition is silver.
It's not about vanity anymore. It's about performance.
Well, the report throws out a number that honestly
shocked me. It says the solar industry, just
solar alone, is projected to consume over 200
million ounces this year. Right, 200 million.
And to give you some context on that, that is
roughly 20 % of the entire global supply swallowed
by just one single industry. That is massive.
And it's not just the sheer volume, it's the
necessity of it. Every single photovoltaic solar
panel on a roof or out in one of those massive
desert farms requires silver paste. How much
are we talking per panel? We're talking roughly
20 grams per panel just to conduct the energy
from the sun into the grid. And with the record
installations we are seeing globally this year,
that demand is entirely non -negotiable. OK.
But here is where I have to play devil's advocate
for a second. Yeah. Let's say I'm the guy looking
at the factory budget. If silver gets too expensive,
can't these manufacturers just use copper? I
mean, copper conducts electricity pretty well,
and it's a lot cheaper. Why not just switch,
right? That is the big question. And honestly,
some manufacturers, particularly over in China,
have tried to shift to copper to cut costs. But
there is a massive penalty. What's the penalty?
You lose efficiency. When you are building a
solar farm, the entire game is efficiency. You
are fighting for every tiny fraction of a percent
of power generation. So if you use copper, you
just get less juice? You get less power, and
you also deal with corrosion issues that you
just don't get with silver. Right. If your panel
produces even 2 % less power because you cheaped
out and used copper, that kills your profit margin
over the 20 -year life of the farm. Oh, wow.
Yeah, so despite the upfront cost, they stick
with silver. It's what analysts call sticky demand.
Sticky demand. Meaning they can't easily switch
away from it. OK, that makes total sense for
solar. But Doug Young's report says it's not
just green energy driving this. It mentions AI
in data centers. Now, I don't usually associate
artificial intelligence with a shiny metal. I
think of chips and software. Sure. What's the
physical connection there? Well, you have to
ask yourself, what runs the software? Massive
data centers. Exactly. Servers that run incredibly
hot and need to be 100 % reliable. We are building
these billion dollar AI training clusters now.
When a tech company is building infrastructure
that expensive, they are prioritizing performance
over price. Right. You're not going to cheap
out on the wiring for a billion dollar supercomputer.
You absolutely aren't going to risk a failure
in a circuit connector or lose processing speed
just to save a few cents by using a cheaper metal.
You need the absolute best conductor to manage
the heat and the speed. So silver is deeply embedded
in the high -end semiconductors, the 5G networks,
the EV control systems. So you have these massive
distinct industries, green energy, AI, EVs. And
they are all fighting for the exact same pile
of metal. And we can't forget the defense angle
here either. Oh right, the critical mineral designation.
Yes. The U .S. government lists silver as a critical
mineral. It's in radar systems, it's in the guidance
chips for missiles, military communications.
So now you have a situation where urgent national
security needs are actively competing with your
new solar panel and your new AI chatbot. Which
sounds like a total recipe for a massive shortage.
Yeah. And this actually leads me directly to
the supply side. This is the part of the deep
dive that always confuses me about commodities.
Let's hear it. I'm looking at the price of silver
and sure it's volatile, but it's generally trending
up. If the world needs so much of this stuff,
why aren't the mining companies just going out
and digging more holes? That's the logical assumption,
isn't it? Economics 101. High demand equals higher
price, which equals more supply. Right. If people
suddenly want way more apples, farmers plant
more apple trees. But silver breaks Economics
101 because of something called the byproduct
quirk. The byproduct quirk. That sounds like
a sci -fi novel. Explain that to me. OK. Let's
use an analogy. Imagine you run a bakery and
your main business is selling donuts. Okay, I'm
with you. But every time you make a batch of
donuts, you end up with a tiny bit of leftover
dough that you bake into a single donut hole.
You sell the donut hole, sure, it's nice extra
cash, but you don't bake an entire batch of large
donuts just because someone wants more donut
holes. You bake for the donuts. So in this mining
analogy, the copper is the doughnut. Exactly.
Roughly 75%, three -quarters of all the silver
produced in the entire world is essentially accidental.
It's a byproduct of mining for copper, lead,
or zinc. That is wild to me. I always just assumed
there were these dedicated silver mines everywhere.
There are very few pure silver mines. They are
geologically quite rare. So here is the core
problem. If the price of silver suddenly doubles,
but the price of copper stays flat, a major copper
miner is not going to dig up thousands of tons
of extra earth. They are chasing the copper.
They don't care enough about the silver bonus?
to change their massive multi -million dollar
operations. Precisely. So the supply of silver
is, what's the economic term? Inelastic. Highly
inelastic. The price of silver can scream higher,
but the actual mine supply won't budge. And the
data in the report proves it. Global mine supply
has been totally stuck at around 800 to 830 million
ounces a year for a decade. It's just completely
flat. It hasn't grown at all, despite the solar
boom, despite the AI boom. And I imagine you
can't just spin up a new mine overnight either.
Oh, no. It takes maybe 10 years to permit and
build a mine. So even if we found the greatest
pure silver deposit on earth today, it wouldn't
actually help us until the mid 2030s. OK, what
about recycling? I know I've got a drawer full
of old iPhones at home. Surely we can melt those
down. We do recycle. It adds about 180 million
ounces a year. That's something. It is. But think
about how physically hard it is to get a microscopic
bit of silver out of a crushed iPhone. It's expensive.
It's energy intensive. And the process. is difficult.
So recycling helps, but it's capped. It cannot
scale up fast enough to suddenly meet a 200 million
ounce solar demand. So let's just do the back
of the napkin math here. We have demand exploding
because of the energy transition in AI. We have
supply that is geologically and economically
stuck. And Doug Young's report says we are looking
at a 67 million ounce deficit for 2026. And remember,
that is just this year. This is the sixth year
in a row we've been operating in a deficit. Six
years. Since 2021, the world has consumed about
300 million ounces more than it has actually
produced. OK, wait, pause. If we have been using
more than we dig up for six straight years, how
are we not totally out? Where is this phantom
silver coming from? It comes from the stockpiles,
the above ground vaults. Think of it exactly
like a savings account. We have been spending
more than we earn every month, so we are draining
the savings. But right now in 2026, those savings
are getting dangerously low. And this brings
us to what I think is the most dramatic part
of this entire analysis, the vaults, specifically
the comics in New York. Yes, the CME Group's
commodity exchange. This is the absolute heart
of the Western silver market. It's where the
global benchmark price is set. So walk us through
the drama happening there. The report mentions
two categories of silver in these vaults, eligible
and registered. And I feel like these financial
terms are designed to be confusing on purpose.
They are a bit inside baseball, but the distinction
is absolutely critical to understanding the shortage.
Let's simplify it. Imagine a giant high -security
warehouse. Eligible Silver is like a classic
car parked in a private locked garage inside
that warehouse. It meets all the purity standards,
it's safely in the vault, but it is strictly
not for sale. It belongs to someone, maybe a
bank, a private investor, a family office, who
is simply paying storage fees. Got it. So it's
physically sitting there, but the market can't
touch it. It's totally off limits. Right. Now
registered silver, on the other hand, is the
inventory sitting out on the showroom floor.
It has a specific warrant attached to it. It
is available for immediate delivery to settle
a trading contract. This is the buffer for the
entire market. If you buy a futures contract
and demand the physical metal, this is the pile
they have to take it from. And what exactly is
happening to that showroom pile right now? It
is vanishing. The report highlights that on February
11th, 2026, the registered inventories dropped
below 100 million ounces. It actually hit a low
near 98 million. Is 98 million a lot? Because
to an average person, that sounds like a massive
mountain of metal. It sounds like a lot until
you compare it to the paper market. And this
is where the system gets really risky. The COMEX
is primarily a paper market. People trade futures
contracts. which are essentially financial bets
on what the price will be without ever intending
to touch a real bar of silver. Right. They're
just speculating. They buy the paper contract,
the price moves up, they sell the contract and
they take the cash profit. No armored trucks
involved. Precisely. That's how it usually works.
But the whole system relies on confidence. There
is a ratio we look at. Open interest versus registered
stock. Open interest is the total number of active
paper contracts out there. Right now, that's
hovering between 130 ,000 and 150 ,000 contracts.
OK, let me do some mental math so we can see
the scale of this. One contract is usually 5
,000 ounces, right? Correct. 5 ,000 ounces per
contract. So 130 ,000 contracts times 5 ,000
ounces. That is roughly 650 million ounces of
paper claims. Exactly versus only 98 million
ounces of actual deliverable registered silver
sitting on the showroom floor. Wow. That is an
insane amount of leverage. Yeah. They're like
six or seven people holding a paper claim for
every one ounce of real metal that's actually
available to give them. It's a giant game of
musical chairs. As long as the music plays and
everyone is happy trading paper and just taking
cash profits, the system works fine. The music
keeps playing. But the report points out that
The music is starting to stutter. We are seeing
a huge surge in what they call Stanford delivery
notices. Meaning the traders aren't taking the
cash settlement anymore. They want the actual
metal. Exactly. Market behavior is fundamentally
changing. Traders are moving from speculating
on press to securing the physical asset. They
see the exact same deficits we are talking about.
They see the massive solar demand. They see the
miners not producing more. And they are saying,
you know what? I don't trust the paper promise
anymore. Put the metal on a truck and give me
the physical bar. And if even a relatively small
percentage of those paper holders demand delivery
all at once, that 98 million ounce vault hits
zero incredibly fast. Correct. You can't just
print silver like you print money. If they want
the metal and it's physically not there, the
whole system jams up. OK. And if that wasn't
complicated enough, we have to bring in the geopolitical
angle, the China factor, because it seems like
every time we look at supply chains lately, all
roads lead right back to Beijing. Is this shortage
just a New York ComEx problem? Not at all, and
this is a crucial piece of the puzzle. China
is actually the giant vacuum cleaner that is
causing the shortage over in New York. You have
to remember, China completely dominates the processing
side of this. They currently control over 40
% of the global silver refining capacity. Okay,
so they dig up the ore or they import it, they
refine it into pure industrial bars, and then
what? Well, historically, they would export a
ton of that fabricated silver out to the rest
of the world. But as of early 2026, the report
notes a massive state policy shift. They're keeping
it. Keeping all of it. They have drastically
reduced exports to prioritize their own domestic
manufacturing, their own solar panels, their
own EVs, their own grid upgrades. So it's strategic
hoarding. Effectively, yes, they clearly see
silver as a strategic asset vital for their industrial
dominance. But here is the actual mechanism that
is aggressively draining the West. The price
disconnect. Right now, silver on the Shanghai
Gold Exchange is trading at a premium of more
than $10 per ounce over the COMEX price in New
York. Wait, $10? That's a huge gap. If silver
is, say, $35 an ounce in New York, it's $45 in
Shanghai. Roughly, yes. So just put yourself
in the shoes of an international silver trader
or a refiner. You have a pallet of silver bars
sitting in a vault in London or Zurich. Do you
sell it in New York for $35 or do you put it
on a ship to Shanghai and make an immediate extra
$10 an ounce? You ship it to Shanghai. Yeah.
Immediately. It's literal free money. And that
is exactly what is happening in the real world.
We are seeing a massive physical arbitrage. The
physical metal is flowing rapidly from west to
east to chase that higher real industrial price.
This is draining the Western vaults like the
COMEX even faster than domestic demand alone
would. It honestly feels like the market mechanism
is breaking. Like the New York price is kind
of fake because it's based on paper trading leverage.
And the Shanghai price is the real price because
it's based on actual desperate industrial need.
That is the exact argument many top experts are
making right now. The West is still pricing silver
like a traditional financial asset, just a line
on a screen that goes up and down based on interest
rates. The East is pricing it like a critical
industrial ingredient that their factories literally
cannot operate without. And history shows us
the physical market always wins in the end. So
what happens when the rubber finally meets the
road here, or I guess when the paper meets the
metal? If the COMEX vaults drop too low, does
the exchange just collapse? Do they put up a
closed for business sign? They have emergency
brakes built into the system and we are already
seeing them pump those brakes hard. The report
notes that the CME, the group that runs the exchange,
raised margin requirements significantly. They
hiked it all the way up to $25 ,000 per contract
in late 2025. OK, for the listener who doesn't
actively trade commodities futures, what does
raising the margin requirement actually achieve?
Think of it like a required down payment on a
house. If you want to control a futures contract
for five thousand ounces of silver, you don't
have to pay the full multi hundred thousand dollar
price up front. You just put down a deposit,
which they call margin. By raising that required
deposit to twenty five thousand dollars, they
make it much more expensive to play the game.
Ah, so they're trying to kick out the speculators,
the little guys who are just making leveraged
bets on the price going up. Exactly. They are
aggressively trying to deleverage the market.
They want to force the paper traders to close
their positions so that the overall open interest
drops. They want to shrink the number of people
playing the musical chairs game before the music
stops. Did it work? Partially. The report shows
we saw open interest drop by about 9 ,500 contracts
in mid -February. So some weaker hands definitely
got shaken out of the market. But that feels
like a total band -aid. Raising the cost of a
paper bed in New York doesn't magically create
more physical silver for a solar panel factory
in Texas? It doesn't at all. It just buys the
exchange a little bit of time. It cools the casino
down, but it doesn't fill the pantry. The industrial
demand is physical and real, and it's not going
away just because the CME changed some trading
rules. The solar factories still absolutely need
the silver paste. The AI data centers still need
the connectors. And our report specifically mentions
the month of March. so focused on watching March?
March is a major delivery month on the futures
calendar. It's when a huge chunk of these contracts
expire and actually settle. February is usually
a quiet off -cycle month, and yet we still saw
record demand for physical delivery. So the deep
fear in the market is that when March hits, the
flood of requests for physical delivery might
completely overwhelm whatever is left of that
registered stock. What is the absolute worst
case scenario here? Let's say I'm a manufacturer.
I bought a contract. I want my silver delivered
to keep my factory running. And the comics looks
at the vault and says, sorry, we're empty. The
exchange does have a built in escape hatch, a
clause for force majeure or forced cash settlement.
They can essentially say, sorry, we don't have
the physical metal. Here is a check for the cash
equivalent instead. But that is a complete disaster
for an end user. If I need physical silver to
build a missile guidance system or a solar array,
I can't melt down a paper check. Exactly. A check
from the CME doesn't conduct electricity. If
forced cash settlement happens on a large scale,
it shatters the trust in the COMEX as a reliable
price discovery mechanism. It proves to the world
that the price flashing on the screen isn't real
because you can't actually buy the physical metal
for that price when you need it. And if that
trust breaks, the global pricing power likely
shifts permanently. over to Shanghai. Because
that's where the physical metal actually is.
It's a massive geopolitical shift in gravity.
It connects right back to something you said
earlier about the invisible nervous system. It
really feels like we are watching a massive realignment
of global economic power just being played out
entirely through bars of silver. We absolutely
are. It's pure geopolitics now. If China controls
the refining capacity and is willing to pay the
true higher price for the physical metal, they
essentially control the supply chain for all
the technologies of the future. Meanwhile, the
West has left trading paper receipts back and
forth for metal that isn't actually in the vault
anymore. It's really a sobering thought for anyone
paying attention. We are so used to thinking
of the modern economy as just numbers on a screen
or software in the cloud. But this deep dive
really reminds us that at the very bottom of
the tech stack, there are actual physical things
atoms that we are simply running out of. We are
hitting the hard physical limits of the green
and digital transition. We think of the cloud
as ethereal and solar energy as infinite, but
they are built on highly finite materials. Silver
is becoming the primary bottleneck. You can have
all the political will in the world for green
energy, but if you don't have the silver, you
do not have the solar panels. So for the listener
sitting at home wondering what to do with all
this information, it's not just about commodity
trading. It's about fundamentally understanding
the physical constraints of the next decade of
human progress. Absolutely. The takeaway is to
watch the vault numbers in New York, watch the
delivery numbers when March rolls around. If
those registered numbers keep dropping towards
zero, we are going to see real fireworks in the
market. We are watching a historic resource squeeze
play out in real time. And here's a final thought
to leave you with, something to maybe chew on
after the show. If the West loses control of
silver pricing, Because we were busy trading
paper while the East was aggressively hoarding
the actual metal bribe. What other critical resources
are we totally mispricing right now? Is silver
just the canary in the coal mine for a much larger
global resource crisis? That is exactly the question
that keeps me up at night. If the paper price
doesn't reflect physical reality, eventually
reality crashes the party. Well on that cheerful
note, we will definitely keep watching The Vaults
for you. Thanks for joining us for this deep
dive. Stay curious and we'll catch you next time.