Silver Price Analysis: Could Basel III and COMEX Supply Tightness Push Silver to $100?

Introduction

The global silver market is going through an important structural change, which goes far beyond the day-to-day price action. After experiencing a steep correction, which momentarily shocked investors, the price has found its range, trading well above the $85/oz level at the time of writing. This is an indication of the underlying dynamics at work in the silver market. The current environment is characterized by tightening physical supply conditions and rapidly changing geopolitical events. To make sense of the future direction of the silver price, it is necessary to look past the day-to-day noise and focus on the three main drivers of the current environment.

The "Risk-Off" Geopolitical Shock

The current driver and cause for the current price action can be attributed to the sharp increase in military action in the Middle East. Following the joint attacks by the U.S. and Israel on Iranian infrastructure over the weekend, and the subsequent threat by Iran to close the Strait of Hormuz indefinitely, risk assets such as traditional equities are seeing a flight of capital.

While silver is not traditionally classified as a monetary safe-haven asset, it plays a role that extends into several sectors, including high-end electronics, communication, and defence technology. According to industry data, high-end defence systems, including precision sensors, high-frequency communication devices, and some aerospace components, require high-conductivity metals such as silver.

The Exchange "Drain" (COMEX & Shanghai)

There has been a significant shift in the difference between paper-based silver markets and the physical metal itself, which shows the strain being felt across the main exchanges globally. Comex Crisis: As of late February, Registered inventories, or the physical silver that is available for delivery, had fallen below the critical 90 million ounces threshold and now stand at 88 million ounces, while the March contract "Open Interest" stands at over 429 million ounces, a staggering 5:1 ratio. This huge difference is an indication of the widening gap between futures market trading and the actual supply. The Shanghai Futures Exchange: On the Eastern front, the Shanghai Futures Exchange (SHFE) has seen its inventory levels fall by almost 90% from its high in 2021, recording a 10yr low of around 306 tons. This has resulted in a 'Shanghai Premium' of over $10/oz, which has sucked physical bars from the West to feed China's solar and AI production plants. 

Basel III and India: The Banking Reset

One of the key and lasting drivers of the repricing of silver has been the way in which silver has been reassessed within the global banking structure.

Basel III Endgame: The Basel III Endgame has significantly changed the silver market, as the ability of bullion banks to hold large unallocated short positions has been effectively removed. With 85% stable funding now required to hold paper silver, derivative-based pricing has become expensive. Physical silver has now achieved Tier 1 Asset status, and banks are now transitioning from net sellers to long-term holders to improve their balance sheets. Indian Factor: In a significant shift in its policy, the Reserve Bank of India (RBI) has announced that it will allow lenders to accept silver jewellery and coins as collateral starting April 1, 2026. This means that a homeowner can offer up to 10kg of jewellery or 500g of coins, which can unlock India's 80,000 tonnes of silver. By allowing "dead capital" to be absorbed into the banking system without having to be sold on the market, the RBI is, in effect, locking up the world's largest secondary silver supply.

Conclusion

The debate is no longer whether silver reaches triple digits, but how much physical metal remains once sovereigns, institutions, and strategic industries have secured their share. What began as a ‘silver squeeze’ is fast becoming a structural shift in how the world prices scarcity