Original author: Bu Shuqing, Wall Street News
The precious metals market is facing a potential delivery crisis.
Senior precious metals analyst Bill Holter recently warned that the New York Mercantile Exchange (COMEX) may experience a physical delivery default for silver as early as March 2026, which would completely destroy the credibility of the existing pricing mechanism and trigger a chain reaction that spreads to the gold and credit markets, ultimately leading to a collapse of the entire financial system.
Abnormal delivery demand has already emerged. According to Holter, in January, which is traditionally a non-delivery month, COMEX has seen over 40 million ounces of silver requested for delivery, while in previous years this number typically ranged from 1 million to 2 million ounces. As the major delivery month of March approaches, delivery demand has reached 70 million to 80 million ounces, potentially exhausting COMEX's currently registered inventory of 110 million to 120 million ounces.
This warning comes at a time when the silver market is experiencing an unprecedented surge. Silver prices have skyrocketed by 154% so far in 2025, with an increase of about 40% in January alone, far exceeding the performance of the stock market during the same period. UBS strategists have alerted clients this week, stating that the recent gains in precious and industrial metals are "out of control."
What happens if delivery fails? Risk of financial system collapse?
The COMEX silver market is facing unprecedented physical delivery pressure. Holter pointed out that the request for 40 million ounces of delivery in January, a non-delivery month, is an extreme anomaly, indicating that a larger-scale run on deliveries may occur in the major delivery month of March.
"If COMEX cannot fulfill its delivery obligations, the value of the contracts will drop to zero," Holter stated. He emphasized that a delivery default would completely negate COMEX's pricing authority, as contracts that cannot be fulfilled have no value.
More seriously, a failure in silver delivery would immediately transmit to the gold market. Holter warned that since gold is essentially a "counter-dollar" or "counter-U.S. Treasury" asset, defaults in the gold market would directly impact the credit market, thereby threatening the stability of the entire financial system.
Currently, COMEX has approximately 110 million to 120 million ounces of registered deliverable silver inventory, but there are doubts in the market about whether this inventory is subject to double pledging or other claims. If the delivery demand in March exceeds the available inventory, the market could face the most severe liquidity crisis since the Silver Thursday event in 1980.
Holter painted a grim picture of the consequences of a delivery default. He predicts that if a delivery failure occurs in March 2026, it will trigger currency devaluation and the collapse of the entire financial system.
"The real economy relies on credit to operate; everything you touch and everything you do involves credit participation," Holter stated. If credit becomes unavailable, the real economy will come to a complete standstill.
This warning is not alarmist. The pricing mechanism in the precious metals market has long relied on paper contracts, with a very low ratio of physical delivery. Once market trust in paper contracts collapses, investors will rush to demand physical delivery, while exchange inventories are far from sufficient to meet all delivery demands.
Considering the total U.S. debt and commitments of $200 trillion, the financial system's reliance on credit has reached a historical extreme. Any crisis of trust in a key market could trigger a chain reaction, and the precious metals market is precisely the last anchor of credit in the entire monetary system.
Price predictions "ridiculously underestimated"
Although silver prices have surpassed $100 per ounce, Holter believes the market is still in the early stages of a rally. He stated that all current price predictions—including the $600 per ounce target proposed years ago—will ultimately be proven "ridiculously underestimated."
Renowned silver analyst Peter Krauth also holds an optimistic view, expecting that in the upcoming "frenzy phase," silver prices could hit $300 per ounce. Krauth believes that $50 per ounce has become the new price floor, and the dramatic adjustment of the gold-silver ratio will be the core driving force behind rising silver prices.
Holter provided a more extreme valuation framework from a monetary perspective. He pointed out that if calculated based on the U.S. federal government's $38 trillion debt, with 8,000 tons of gold reserves as support, gold prices should reach $200,000 per ounce. This logic also applies to the repricing of silver.
Some large traders and banks that have shorted precious metals are already in financial distress. Holter stated that the continuously rising metal prices—especially silver prices—are putting severe pressure on these institutions, which could exacerbate market instability.
The strong performance of silver is rooted in deep imbalances in the fundamentals. As a metal with both monetary and industrial properties, silver is being squeezed by multiple demands.
Industrial demand remains robust, particularly in sectors such as solar energy, electric vehicles, and electronics. Meanwhile, investment demand is also surging, with investors viewing silver as a hedge against inflation and currency devaluation.
On the supply side, there are structural constraints. Silver is primarily mined as a byproduct of base metals like copper, lead, and zinc, making it difficult for production to quickly respond to price signals. This rigidity in supply can lead to sharp price fluctuations during periods of surging demand.
Krauth emphasized that all the factors supporting the rally are in place to last "for quite a long time." Although there are short-term risks of a pullback, the medium to long-term trend has already been established.
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