The latest warehouse data released by the Singapore Exchange (SGX) on August 5, 2026, showed that as of the close on August 4, the total silver inventory in SGX-approved warehouses had plunged to 1,287 tonnes, a sharp 15% decrease from 1,514 tonnes the previous week, marking the lowest level since October 2023. This sudden inventory drop sparked widespread market concern, with the spot silver delivery premium immediately soaring to $0.85 per ounce, the highest record since SGX launched its silver futures contract.
Supply-Demand Logic Behind the Inventory Plunge
The sharp decline in SGX silver inventory is not an isolated event. According to clearing statistics released by the London Bullion Market Association (LBMA) during the same period, London's silver inventory also decreased by 3.2% in the last week of July. The simultaneous inventory tightness at the world's two major precious metals storage hubs reflects a further intensification of the physical silver supply-demand imbalance.
From the demand side, the continued expansion of the photovoltaic industry is the main driver of industrial silver demand growth. In the first half of 2026, global newly installed photovoltaic capacity reached a record 180 GW, a year-on-year increase of 42%. Silver, as the core conductive material in front-side silver paste for photovoltaic cells, sees usage of about 0.12 grams per cell for monocrystalline PERC cells, while new high-efficiency cells like TOPCon and HJT require even higher amounts, reaching 0.15 grams and 0.22 grams respectively. According to data from the China Photovoltaic Industry Association (CPIA), silver usage in the photovoltaic industry increased by 35% year-on-year in the first half of 2026, reaching 4,800 tonnes, with its share of total global industrial silver demand climbing from 12% in 2020 to 22%.
Meanwhile, emerging fields such as 5G communications, new energy vehicle electronics, and AI data center servers are also continuously expanding the industrial applications of silver. The Silver Institute, in its "2026 Silver Industrial Demand Report" released at the end of July, pointed out that global industrial silver demand is expected to reach 620 million ounces (approximately 19,280 tonnes) in 2026, an 8% year-on-year increase and a record high. Among these, demand growth in the photovoltaic and electronics sectors is the most significant.
Supply Side: Sluggish Mine Output Growth
In stark contrast to robust demand, silver supply growth is sluggish. Mexico, the world's largest silver producer, saw its output fall 2.1% year-on-year in the first half of 2026, mainly affected by tightened mining policies and declining ore grades at some mines. Peru, the second-largest producer, also experienced a 1.8% year-on-year decline. Total global silver supply is expected to grow by only 0.5% to 1.01 billion ounces (approximately 31,420 tonnes) in 2026, widening the supply-demand deficit to over 4,000 tonnes.
Additionally, the London Bullion Market Association (LBMA) has strengthened compliance reviews for silver deliveries since late 2025, causing some bars not meeting new standards to be temporarily frozen for delivery. As the only exchange in Asia offering physical delivery for both gold and silver, SGX's warehouse network has absorbed some silver inventory transferred from London, but recent delivery delays have paradoxically exacerbated local inventory tightness.
Delivery Premium Soars: A Signal of Physical Tightness
The SGX spot silver delivery premium rapidly climbed from $0.15 per ounce in early July to $0.85 on August 5, an increase of over 4.6 times. This premium level means that purchasing one standard contract (1,000 ounces) of physical silver on SGX requires an additional payment of $850 to ensure smooth physical delivery.
Market analysts point out that a soaring delivery premium typically signals that the physical silver supply-demand imbalance has transmitted to the delivery process. As Asia's largest physical precious metals delivery platform, changes in SGX's warehouse data often lead price trends. During the COVID-19 outbreak in March 2020, SGX silver inventory briefly fell below 1,000 tonnes, with the spot premium rising to around $0.60, followed by silver prices surging from $12/oz to $28/oz within three months. The current $0.85 premium level has surpassed the 2020 high, suggesting the market's thirst for physical silver may be more severe than the data superficially indicates.
Gold-Silver Ratio Narrows: Silver's Catch-Up Rally
The gold-silver ratio (the price of gold divided by the price of silver) fell to 72.5 on August 5, further narrowing from 78.3 at the end of July. Historical data shows that a gold-silver ratio in the 70-75 range typically corresponds to a strong catch-up rally phase for silver. After the 2008 financial crisis, the gold-silver ratio fell from 85 all the way to 32, with silver significantly outperforming gold. After the 2020 pandemic, the ratio also dropped from 125 to around 65, with silver similarly achieving a doubling in price.
Currently, the gold-silver ratio is oscillating around 72, with silver prices consolidating in the $35-$36 per ounce range. If historical patterns repeat, and the ratio further declines to 60 or even 50, silver prices could potentially challenge the $45-$50 range. The supply tightness sentiment triggered by the SGX inventory plunge may act as a catalyst driving silver's catch-up rally.
Singapore's Warehouse Siphon Effect: Strengthened Role as Asia's Precious Metals Hub
Behind the plunge in SGX silver inventory also lies the siphon effect of Singapore's role as Asia's precious metals warehousing hub. As the center of global precious metals trading shifts from London and New York to Asia, increasing amounts of physical silver from the Asian region are being transported to Singapore for delivery and storage. Since 2026, SGX's silver warehousing fee revenue has increased by 27% year-on-year, reflecting strong warehousing demand.
However, Singapore does not produce silver locally, and its warehouse network relies entirely on imports. When global silver supply is tight, inventory fluctuations in Singapore tend to be more volatile than in London and New York. Part of the reason for this inventory plunge is that Asian end-users (such as Chinese photovoltaic companies and Indian jewelers) are directly withdrawing silver from SGX warehouses, leading to rapid inventory depletion.
Industry insiders note that SGX is considering increasing its silver warehousing capacity and plans to add two new certified warehouses before the first quarter of 2027 to alleviate current delivery pressures. However, in the short term, the tight inventory situation may be difficult to improve quickly.
Outlook: Bullish Logic for Silver Strengthens
In summary, the plunge in SGX silver inventory combined with the soaring delivery premium provides solid physical fundamental support for silver bulls. Against the backdrop of continuously growing industrial demand from photovoltaics, 5G, and new energy vehicles, coupled with sluggish mine supply growth, the silver supply deficit is expected to widen further in the second half of 2026.
From an investment strategy perspective, investors can focus on the following three aspects:
- Monitor Weekly SGX Inventory Data Reports: The weekly inventory update every Tuesday will be a key indicator for judging the degree of supply tightness. If inventory continues to decline and falls below 1,200 tonnes, it could trigger a new round of short squeezes.
- Track Changes in the Gold-Silver Ratio: If the gold-silver ratio breaks below the 70 mark, the allocation value of silver will become more prominent. Investors are advised to appropriately increase the weighting of silver in their precious metals portfolio.
- Watch the Delivery Premium Trend: A persistently high spot premium implies an increased risk of physical tightness transmitting to the futures market, potentially triggering a shift in the silver futures term structure from contango to backwardation, further pushing up near-month contract prices.
Of course, investors also need to be wary of short-term volatility risks in silver prices. The minutes of the Federal Reserve's September meeting showed some members expressing concern about an inflation rebound. If US inflation data unexpectedly rises, it could delay the pace of rate cuts, exerting pressure on the overall valuation of precious metals. However, against the backdrop of intensifying physical supply-demand contradictions, silver's industrial and safe-haven attributes resonate, and the medium-term upward trend remains promising.
The plunge in SGX silver inventory may just be the tip of the iceberg in the global silver supply-demand landscape transformation. For investors deeply engaged in the Singapore precious metals market, understanding the industrial logic behind inventory data is often more valuable than simply chasing price fluctuations.
