UBS Increases 2026 Silver Supply Deficit - Is Silver About To Be 'Volkswagened'?

UBS has increased its estimate of the 2026 silver supply deficit to 293 million (M) oz. and says it “favors being long”.

When a piranha favors something, that has near-term meaning.

London’s Just-In-Time Silver Operation Has A Problem

When the City of London’s silver market seized for 1.5 hours on October 10, 2025 due to lack of silver availability, it revealed to the world that the bottom of London’s publicly available silver stock occurred with 140M oz. of silver remaining in London vaults that were not held by Exchange Traded Funds (ETFs).

Importantly, it let everyone know that London’s silver market is functioning on a just-in-time system for silver delivery where silver can be delivered to the billions of oz. of cash/spot contracts open in London but only if such metal is first delivered to London.

It likely came as news to many holders of these immediate ownership and delivery cash contracts for silver that the London market was tapped out and stood cap-in-hand awaiting silver delivery.

The Bank of England’s (BoE’s) London price fixing scheme for silver relies on holders of billions of oz. of cash promissory notes believing that the paper they hold is as good as metal - this belief is now historical for many.

Odds Of Receiving Silver In London

London’s silver market trades over 700M oz. of silver on an active day in its cash/spot market with an estimated 2B+ oz. of open claims. What are the odds of receiving silver for the London promissory note holders?

Given the 300M oz. estimated silver supply deficit for 2026 and the October London tap-out, let’s see where the silver can come from to solve London’s billion oz. problem.

London: London received a net 54M oz. of silver to its vaults post October 10 in latest data.

New York: New York has 138M oz. of silver in the ‘registered’ category that is available to market.

Shanghai: 39M oz. of total vault holdings of silver.

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Total major market stocks: 231M oz. of liquid silver

There are other vaulted stocks of silver in private vaults globally but their availability to market is uncertain. The above is what we can see.

These public market vault stocks of silver need to serve local market needs as well as London’s and do not have to be drawn to zero for silver to start to move. That is what we are seeing now.

Given the billions of oz. of London claims and another 300M oz. silver supply deficit in the coming year, we appear to have the onset of a global silver squeeze that has resulted after decades of price fixing down silver in London.

We have demand that cannot be met by a withered production supply chain coupled with a massive market overhang of billions of oz. of claims.

Silver’s Volkswagen Moment

In 2008, a squeeze developed in Volkswagen AG shares (where AG is Aktiengesellschaft and not the element ‘argentum’ / silver ) when it became broadly evident to the market that Volkswagen shares that could not be delivered had been sold into the market by short sellers.

The short sellers were forced to enter the market and buy shares to negate their short exposure as risk managers in hedge funds do not care that the fundamentals for an equity are bad, they simply demand traders to cover their short as losses mount.

What resulted was a 10x move in the price of Volkswagen shares completely divorced from profitability prospects of the underlying company that were unchanged.

Figure 1. - Share Price Volkswagen AG 2005 to 2025; source: stockwatch.com

Silver now faces a similar situation to Volkswagen in 2008.

Silver that cannot be delivered has been sold into the market as demand continues to increase and supply stagnates. The primary difference is that Volkswagen shares soared on unchanged prospects in 2008 while silver is soaring on immensely bullish prospects as the London price-fixing system fails and silver’s value as a safe haven monetary and strategic asset become known.

This implies that silver’s price will reset much higher on a long term step-change basis vs. Volkswagen’s share price roundtrip.

Silver’s potential now is the exact inverse of the City of London’s silver market’s.

Best regards,

David Jensen