Why the London Bullion Market Association (LBMA) & the fractional-metal system are heading towards collapse🧵(a thread)
1/12
The house of paper metal is cracking.
For decades, the LBMA’s fractional system thrived on unallocated #gold and #silver claims.
Now, vaults are bleeding metal faster than they can refill.
London’s silver stocks are at record lows — the foundation is eroding
1/12
The house of paper metal is cracking.
For decades, the LBMA’s fractional system thrived on unallocated #gold and #silver claims.
Now, vaults are bleeding metal faster than they can refill.
London’s silver stocks are at record lows — the foundation is eroding
2/
Silver’s backwardation lasting over two weeks just exposed the system.
It’s not a quirk — it’s a warning flare.
For the first time in years, spot silver trades above futures for this long, showing what’s coming
“The market no longer trusts paper — it wants real metal.”
The countdown has begun
Silver’s backwardation lasting over two weeks just exposed the system.
It’s not a quirk — it’s a warning flare.
For the first time in years, spot silver trades above futures for this long, showing what’s coming
“The market no longer trusts paper — it wants real metal.”
The countdown has begun
3/
Withdrawals are outpacing replenishment.
LBMA vault holdings of silver fell from over 1.1 billion ounces in 2021 to around 800 million in 2025.
That’s the fastest depletion on record.
This isn’t rotation — it’s an exodus of real metal from the paper system
Withdrawals are outpacing replenishment.
LBMA vault holdings of silver fell from over 1.1 billion ounces in 2021 to around 800 million in 2025.
That’s the fastest depletion on record.
This isn’t rotation — it’s an exodus of real metal from the paper system
4/
Meanwhile, mining can’t catch up.
A decade of underinvestment and falling ore grades means global silver output is flat.
Mine supply is ~835 million oz against demand of 1.2 billion oz.
The deficit is real, structural, and irreversible in the short term
Source- Financial express
Meanwhile, mining can’t catch up.
A decade of underinvestment and falling ore grades means global silver output is flat.
Mine supply is ~835 million oz against demand of 1.2 billion oz.
The deficit is real, structural, and irreversible in the short term
Source- Financial express
5/
And where’s all that metal going?
East.
Flows to China, India, and the Middle East keep rising — central banks and private vaults are taking delivery.
Once it leaves London, it rarely returns.
The West’s “float” of deliverable metal is drying up
And where’s all that metal going?
East.
Flows to China, India, and the Middle East keep rising — central banks and private vaults are taking delivery.
Once it leaves London, it rarely returns.
The West’s “float” of deliverable metal is drying up
6/
The cracks are now visible in settlement delays (T+ slippage).
LBMA deliveries that once cleared in 1–2 days now stretch beyond a week.
When “immediate” metal isn’t immediate anymore, the system is no longer liquid — it’s jammed.
The plumbing is seizing up
The cracks are now visible in settlement delays (T+ slippage).
LBMA deliveries that once cleared in 1–2 days now stretch beyond a week.
When “immediate” metal isn’t immediate anymore, the system is no longer liquid — it’s jammed.
The plumbing is seizing up
7/
The entire LBMA system rests on fractional ownership.
Multiple claims on a single bar.
It works as long as most participants never ask for delivery.
But what happens when they do?
A run on metal — just like a bank run — but with no central bank to print silver
The entire LBMA system rests on fractional ownership.
Multiple claims on a single bar.
It works as long as most participants never ask for delivery.
But what happens when they do?
A run on metal — just like a bank run — but with no central bank to print silver
8/
Lease rates just screamed warning signs.
Borrowing silver costed more than it has in years.
When lease rates rise and backwardation persists, it means physical liquidity is gone.
Lease rates just screamed warning signs.
Borrowing silver costed more than it has in years.
When lease rates rise and backwardation persists, it means physical liquidity is gone.
9/
The LBMA’s unallocated structure hides this fragility.
In calm times, it feels infinite — metal always appears when needed.
But when everyone wants bars, not credits, the system turns illiquid overnight.
It’s a liquidity illusion built on confidence alone
The LBMA’s unallocated structure hides this fragility.
In calm times, it feels infinite — metal always appears when needed.
But when everyone wants bars, not credits, the system turns illiquid overnight.
It’s a liquidity illusion built on confidence alone
10/
This isn’t a cyclical shortage.
It’s the culmination of a decade of paper suppression, industrial demand growth, and Eastward accumulation.
A structural squeeze — not a speculative one.
The paper world and physical world are diverging irreversibly
This isn’t a cyclical shortage.
It’s the culmination of a decade of paper suppression, industrial demand growth, and Eastward accumulation.
A structural squeeze — not a speculative one.
The paper world and physical world are diverging irreversibly
11/
Watch these signs:
– Persistent backwardation
– Rising lease rates
– Vault drain with no replenishment
– T+ settlement delays
– ETF redemptions for physical delivery
When these converge, the fractional metal system won’t bend — it will break
Watch these signs:
– Persistent backwardation
– Rising lease rates
– Vault drain with no replenishment
– T+ settlement delays
– ETF redemptions for physical delivery
When these converge, the fractional metal system won’t bend — it will break
12/
The world treated #gold and #silver like they were cash-in-bank.
But the vaults were only partially full.
Now, everyone’s reaching for the same bars — and the vault keeper is running out of keys.
“The end of the paper era begins when the last ounce leaves London.”
The world treated #gold and #silver like they were cash-in-bank.
But the vaults were only partially full.
Now, everyone’s reaching for the same bars — and the vault keeper is running out of keys.
“The end of the paper era begins when the last ounce leaves London.”
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