01/02/2026
GOLD AND SILVER - THE FIRST CORRECTION SINCE THE BULL RUN STARTED IN SEPTEMBER, 2025
As the metals markets take a breather from a major correction at the end of last week we thought we'd update you on what is happening in the precious metals market as we enter February, 2026. At the close of business on Friday 30th January, 2026 silver has taken it's biggest single one-day-trading drop ever down 25% to £62-a-Troy Ounce from an all-time high earlier in the week of £86. Gold's fall was not so meteoric with a drop of 8.3% down from £3,896 to £3,574. It had been trading briefly mid week at over £4,000-a-Troy Ounce.
The recent reports of bullion houses, dealers, and refiners refusing or limiting the intake of scrap silver (jewellery, silverware, "junk" coins) stem from a "bottleneck" in the recycling supply chain, driven by high volume, extreme financing costs, and refinery backlogs.
Here is a breakdown of what is happening in the silver market:
1. The Core Problem: A Refining Bottleneck
Overwhelmed Capacity: A massive surge in people selling scrap silver—often triggered by high prices—has overwhelmed the capacity of refineries to process it.
Refinery Focus: Refineries are currently prioritizing "quick wins," such as processing gold or turning high-purity (.999) silver into 1000oz bars, rather than taking time-consuming scrap.
Time Lag: It can take weeks to turn raw scrap into saleable, refined silver. Refiners are refusing new intake to avoid holding material during this downtime.
2. High Financing & "Lease Rate" Costs
Unworkable Costs: Refineries typically borrow money or silver to finance the purchase of scrap while it is being processed (known as leasing). The cost to do this—the silver lease rate—has spiked to unworkable levels, making it unprofitable to hold scrap.
Liquidity Crisis: Because refiners cannot easily process or finance the scrap, they are not advancing payments to dealers, causing the wholesale market to lock up.
3. Dealer Caution (Supply vs. Demand)
Fear of Price Drops: Many dealers are worried about buying scrap at high prices only to have the market correct downward before they can sell it.
Dealer Inventory: When dealers cannot easily pass off scrap to refiners, their own inventory piles up, forcing them to stop buying from the public or offer significantly lower prices.
4. Key Takeaways
Gold is Not Affected: This issue is primarily impacting silver; gold buying rates remain mostly normal.
Bullion vs. Scrap: Many dealers are still happy to buy investment-grade bullion bars and coins, just not raw jewellery or silverware.
Spot Price Disconnect: This has created a gap between the "paper" spot price and what you can actually get for physical scrap.
Basically it is not that the industry does not want silver; it is the downstream system to refine and finance it that has stalled.
