The silver market is facing increasing pressure as trade war fears escalate, with higher interest rates on borrowing the metal adding to signs of global dislocation.
A surge in rental rates for the precious metal has been the latest warning sign, with concerns growing over the impact of further tariffs from US President Donald Trump. That has prompted a rush to ship silver to the US in a bid to capture a premium in New York, which could put pressure on London.
The precious metals gold and silver have been in a bearish spiral this year, as Trump has challenged the global trade order. That has spurred demand for havens, and also opened up rare price dislocations between major markets. While spot silver has gained about 17% this year, making it one of the best performing commodities, futures prices in New York have outperformed.
On the physical level, tariff concerns, particularly levies on Canada and Mexico, and broader reciprocal restrictions that could come into effect next month, have drawn large amounts of gold and silver from London to US vaults. But given their relative density and value, gold tends to be transported by air, while silver often takes a much longer journey, usually by ship.
Rental rates for borrowing metals, generally for short periods, have surged. One-month rates for silver hit 6% this month after a bigger jump in February. That partly reflects concerns about rapidly depleting inventories in the British capital, with holdings hitting a record low last month. Moreover, not all that is left is tied to exchange-traded products. "I expect the rental rates in London will remain high for about two to three months," said Cao Shanshan, an analyst at COFCO Futures Co. With the U.K.-to-U.S. transfer underway, "silver is much larger than gold, so the silver transfer is likely to take longer," he said.
The totals reported by U.S. exchanges reflect the chaos. Comex-measured silver inventories have risen to their highest level in data going back to 1992 after surging 40% so far this quarter, a record-breaking gain. While New York is still attracting metals for now, there are also concerns that flows could be thrown into a protracted reversal if silver runs into a shortage in London vaults.
"If the long-touted ‘silver squeeze' materializes, these slower trade flows would be a major contributor to prolonging" any potential disruption, BMO Capital Markets analyst George Heppel said in a note. That's because it takes time for silver stocks to flow from the U.S. back to London, he said.
The U.S. imports about 70% of its silver from Canada and Mexico, which have borne the brunt of the Trump administration's trade moves so far. Ottawa then announced retaliatory tariffs of 25% on about C$30 billion ($20.8 billion) of U.S.-made goods, including silver. Trump has since reiterated his desire for April 2 to mark a new wave of levies.
"The market is likely underestimating the scale and impact of the U.S.'s April 2 reciprocal tariffs," Citigroup Inc. analysts including Max Layton said in a note, highlighting the price dislocation. There could be "substantial upside potential if reciprocal tariffs are implemented over the next six months," they said, adding that silver is unlikely to be exempt from the levies. Read More: Lutnick Praises UK, Mexico, Blasts Canada for Trade Retaliation
Spot silver was trading just above $34 an ounce on Tuesday, with Comex futures nearly 70 cents higher. TD Securities also signaled its concerns. "If the reciprocal tariffs were really the same, you would expect retaliatory tariffs on Canadian silver and that's about 20% of U.S. imports — so there's a higher risk associated with silver," said Daniel Ghali, senior commodity strategist at TD. "Even if the disruption is completely resolved overnight, we can't go back to the world before because you never know what's going to happen the next day."
Source: Bloomberg
Silver price (XAG/USD) holds mild losses after two days of gains, trading around $38.20 per troy ounce during the Asian hours on Friday. The non-interest-bearing Silver attracts some sellers as the up...
Silver (XAG/USD) is edging lower on Thursday, trading around $37.57 after logging a modest gain of nearly 0.56% on Wednesday. The metal remains elevated after marking a 14-year high of $39.13 earlier ...
Silver price (XAG/USD) trades in a tight range around $38 during the Asian trading session on Wednesday. The white metal consolidates as investors await more cues regarding trade talks between the Uni...
Silver price (XAG/USD) gains ground after registering losses in the previous two sessions, trading around $37.80 per troy ounce during the Asian hours on Wednesday. The safe-haven demand for Silver gr...
Silver prices (XAG/USD) recovered from their latest decline from the previous session, rebounding toward a 14-year high of $39.13, reached on Monday (July 15th), and traded around $38.40 per troy ounc...
The EUYR/USD finished Friday's session with gains of over 0.26% amid a weaker US Dollar, following dovish comments by Fed Governor Christopher Waller, which weighed on US Treasury yields. Still, an improvement in Consumer Sentiment capped the...
The U.S. dollar slipped against the euro on Friday but held on to weekly gains, as investors weighed expected Federal Reserve policy amid signs that tariffs may be starting to increase some inflation pressures and as U.S. President Donald Trump...
Former U.S. President Donald Trump threatened to impose tariffs on members of the BRICS group of nations on Friday, warning the alliance would quickly collapse if it ever becomes a significant economic force. "When I heard about this group from...
The United States Commerce Department is set to impose preliminary anti-dumping duties of 93.5% on graphite imported from China after concluding the...
US stocks advanced on Thursday, supported by upbeat earnings and solid economic data as markets brushed aside lingering concerns over President...
Federal Reserve Governor Chris Waller, an advocate for an immediate interest rate cut, said on Friday he would accept the job as head of the U.S....
Federal Reserve Governor Christopher Waller said on Thursday he continues to believe the U.S. central bank should cut interest rates at the end of...