Silver Market Decouples from COMEX as Physical Players Abandon Exchange
The silver market is undergoing a significant shift, with physical players quietly walking away from the COMEX futures exchange. This decoupling between the physical and paper markets has been evident for months, but new data confirms it.
Silver open interest on COMEX has collapsed to historically low levels of just over 100,000 contracts, while China imports a staggering 836 tonnes of silver in March, one of the strongest monthly prints on record. Major miners and refiners are bypassing the exchange entirely, selling production directly to Chinese buyers at premiums over 25% above the COMEX benchmark.
A deep dive into the CFTC Commitment of Traders data reveals a significant drop in Producer/Merchant/Processor/User (PMPU) shorts, representing physical hedgers who traditionally supply and hedge on the exchange. PMPU shorts have fallen sharply to around 19,200 contracts, roughly half the 2024 peak and below every prior year's average.
The numbers speak for themselves: physical hedgers are reducing their participation on COMEX futures, driving real physical tightness in the market. The longer this decoupling persists, the greater the pent-up pressure becomes, setting the stage for a potential price surge when the physical market eventually forces a re-connection.