Silver Faces "Delivery Failure" Crisis? March Could Be a "Critical Moment" for Precious Metals

Original author: Bu Shuqing, Wall Street Insights

The precious metals market is facing a potential delivery crisis.

Senior precious metals analyst Bill Holter recently warned that the New York Commodity Exchange (COMEX) could face a physical silver delivery default as early as March 2026. This would completely destroy the credibility of the existing pricing mechanism, trigger a chain reaction spreading to the gold and credit markets, and ultimately lead to the collapse of the entire financial system.

Abnormal delivery demand has already emerged. According to Holter, in January, traditionally a non-delivery month, COMEX has seen over 40 million ounces of silver requested for delivery. In previous years, this figure was typically only 1 to 2 million ounces during the same period. As the major delivery month of March approaches, delivery demand could reach 70 to 80 million ounces, potentially depleting COMEX's currently registered inventory of 110 to 120 million ounces.

This warning comes as the silver market experiences an unprecedented rally. Silver prices have surged 154% year-to-date in 2025, with a roughly 40% gain in January alone, far outpacing the stock market. UBS strategists have already warned clients this week that the recent gains in precious and industrial metals are "out of control."

If Delivery Fails, Is the Financial System at Risk of Collapse?

The COMEX silver market is facing unprecedented pressure for physical delivery. Holter points out that the appearance of 40 million ounces of delivery requests in January, a non-delivery month, is an extreme anomaly, signaling the possibility of a larger-scale run during the major delivery month of March.

"If COMEX cannot fulfill its delivery obligations, the contract value will go to zero," Holter stated. He emphasized that a delivery default would completely negate COMEX's pricing authority, as contracts that cannot be honored hold no value.

More seriously, a silver delivery failure would immediately transmit to the gold market. Holter warns that because gold is essentially an "anti-dollar" or "anti-U.S. Treasury" asset, a default in the gold market would directly impact the credit market, thereby threatening the stability of the entire financial system.

Currently, COMEX's registered deliverable silver inventory is approximately 110 to 120 million ounces, but there are market doubts about whether this inventory is subject to double pledging or other encumbrances. If March delivery demand exceeds available inventory, the market will face its most severe liquidity crisis since the Silver Thursday event of 1980.

Holter paints 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 to zero and the collapse of the entire financial system.

"The real economy operates on credit. Everything you touch, everything you do, involves credit," Holter said. If credit becomes unavailable, the real economy would grind to a complete halt.

This warning is not alarmist. The pricing mechanism of the precious metals market has long relied on paper contracts, with physical delivery constituting an extremely low proportion. Once trust in paper contracts collapses, investors will rush to demand physical delivery, and exchange inventories are far from sufficient to meet the delivery demands of all contracts.

Considering the United States' total debt and commitment scale of $200 trillion, the financial system's reliance on credit has reached a historical extreme. A crisis of trust in any key market could trigger a chain reaction, and the precious metals market is precisely the final anchor of trust for the entire monetary system.

Price Forecasts "Laughably Underestimated"

Despite silver prices breaking through $100 per ounce, Holter believes the market is still in the early stages of its rally. He stated that all current price forecasts—including the $600 per ounce target proposed several years ago—will ultimately prove to be "laughably underestimated."

Renowned silver analyst Peter Krauth is similarly optimistic, expecting silver prices to potentially surge to $300 per ounce during the upcoming "mania phase." Krauth believes $50 per ounce has become the new price floor, and a dramatic adjustment in the gold-to-silver ratio will be the core driver pushing silver prices higher.

Holter provides an even more extreme valuation framework from a monetary perspective. He points out that if calculated based on the U.S. federal government's $38 trillion debt, supported by 8,000 tons of gold reserves, the gold price should reach $200,000 per ounce. This logic also applies to the repricing of silver.

Some large traders and banks shorting precious metals have already fallen into financial distress. Holter indicated that the persistently rising metal prices—especially silver prices—are putting severe pressure on these institutions, which could exacerbate market instability.

Silver's strong performance is rooted in a deep-seated fundamental imbalance. As a metal possessing both monetary and industrial attributes, silver is being squeezed by multiple demand forces.

Industrial demand remains robust, particularly in sectors like solar energy, electric vehicles, and electronics. Simultaneously, investment demand is surging, with investors viewing silver as a hedge against inflation and currency devaluation.

The supply side faces structural constraints. Silver is primarily a by-product of mining base metals like copper, lead, and zinc, making its production difficult to respond quickly to price signals. This supply rigidity is prone to triggering sharp price volatility when demand surges.

Krauth emphasizes that all the elements supporting a sustained rally for "quite some time" are in place. Although there is a risk of short-term pullbacks, the medium-to-long-term trend has been established.