How COMEX Inventories Affect Silver Futures (SI)
If you trade Silver futures (SI) and don’t understand COMEX inventories, you’re missing the structural risk behind the chart. Price is not just candles and levels; it’s tied to how much silver is actually sitting in COMEX warehouses, who owns it, and how much is available to back delivery. This isn’t tinfoil-hat stuff—this is how the plumbing of the SI contract works.
What COMEX Inventories Actually Are
COMEX inventories are the silver bars held in exchange-approved warehouses that can be used to settle SI futures contracts. Think of it as the “physical backing” sitting behind a financial market that mostly cash-settles but is capable of delivery.
Two main labels matter:
- Eligible silver – Good-delivery bars sitting in the system, but not currently pledged against SI futures delivery.
- Registered silver – Bars specifically tagged as available for delivery against SI futures.
Everyone on social media screams about “total COMEX inventory,” but for futures risk, registered inventory is what matters most.
Registered vs Eligible: Why the Difference Matters
| Category | What It Means | Impact on SI |
|---|---|---|
| Eligible | Meets specs, not committed to delivery | Potential future backing, but optional |
| Registered | Officially available to fulfill futures | Directly backs open interest and delivery |
Low eligible with healthy registered = not ideal, but manageable. High eligible and low registered = big players can move metal into registered if needed, but might choose not to. Low registered and high open interest in nearby SI contracts? That’s where squeeze risk comes from.
How Inventory Levels Interact With Open Interest
You can’t judge inventories in a vacuum. You match them against open interest in the front-month SI contracts.
- If registered silver is huge compared to open interest → low squeeze risk.
- If registered silver is tight compared to open interest → squeeze risk rises.
- If registered silver falls rapidly into a delivery month → market pays attention, even if price doesn’t jump instantly.
This is where the “paper vs physical” narrative comes from, but you don’t need to join that religion. You just track:
- Is registered inventory rising or falling?
- Is open interest expanding into that drop?
- Are spreads and front-month prices reacting?
Drawdowns, Restocking, and Price Behavior
COMEX inventories don’t move tick-by-tick with SI, but big trends in inventory do shape narrative and risk pricing.
When Registered Inventories Fall
- Signal: Metal is leaving the exchange system.
- Story: Either investment demand, off-exchange deals, or refinery flows are pulling silver out.
- Effect: Squeeze chatter rises, firms get more cautious shorting aggressively into lows.
When Registered Inventories Rise
- Signal: Metal is being added back, often from eligible or external flows.
- Story: Producers or large holders are comfortable parking silver on-exchange.
- Effect: Reduces “tightness” narrative, makes prolonged short-covering moves less likely.
None of this overrides short-term drivers like dollar strength or CPI shocks—which you already saw in How Dollar Strength Impacts SI Price Movement and U.S. Economic Data That Moves SI. Inventories are the background, not the spark.
How Inventories Feed Into Squeeze Risk
A classic silver squeeze setup looks something like this:
- Registered inventories trending lower over months.
- Strong industrial and investment demand building in the background.
- Front-month open interest stays high into delivery.
- Shorts bet on “plenty of metal” that doesn’t actually exist in registered form.
If longs decide to stand for delivery instead of rolling out, shorts are cornered: they either find metal, buy back futures at ugly prices, or reshuffle exposure elsewhere.
Does this happen every month? No. Can it happen when conditions line up? Yes. Your job is not to scream “squeeze” every week—it’s to recognize when the setup actually makes sense.
Why Inventories Don’t Explain Every SI Move
Retail traders love to blame “suppression” anytime SI drops while inventories fall. Reality is more boring:
- SI trades on macro conditions first (dollar, rates, risk).
- Industrial demand shifts change medium-term direction.
- COMEX inventories change the risk profile of those moves, not the spark.
You saw the demand side in Industrial Demand and SI Futures. Inventories are the other half of the long-term tug-of-war: how much metal is actually floating around and how quickly can it show up on-exchange.
Practical Use: How a Trader Should Treat COMEX Silver Inventories
Here’s how to use COMEX inventory data like a trader, not a conspiracy theorist:
- Trend, not tick: Watch multi-week inventory trends, not day-to-day noise.
- Registered vs open interest: Squeeze risk rises when registered stocks fall while front-month OI stays heavy.
- Context first: Tight inventories plus dollar weakness plus strong demand = serious upside risk.
- Spread behavior: Watch SI spreads for signs of stress—front months going bid relative to back months.
If you’re intraday scalping SI, inventories won’t tell you where to put your stop. That’s where contract mechanics and ATR come in, which I break down in SI Volatility and ATR Profile. Inventories matter most when you’re:
- holding swing positions across months
- trading spreads
- deciding how aggressive you want to be short into structural tightness
Final Takeaway
COMEX silver inventories don’t control every tick of SI, but they define how fragile the system is under stress. Registered vs eligible, inventory drawdowns, and their relationship to open interest are what separate traders who understand the plumbing from gamblers quoting Twitter threads. Use inventories as a structural risk gauge, stack it with macro, demand, and volatility, and you stop getting blindsided by the moves that “make no sense” to everyone else.