Comex silver seen heading back to London due to record spot prices
By Ashitha Shivaprasad
LONDON (Reuters) – Silver, which flooded into the United States earlier this year due to fears of tariffs on imports, is likely to return to the London physical market, where a current shortage of the metal has pushed spot prices above U.S. futures.
Traders looking to avoid potential tariffs are sending silver to the United States due to be included in a draft list of critical U.S. minerals in September as part of an effort to secure domestic supply chains for the key metal.
Spot silver was trading around $50.10 an ounce on Friday after reaching a record high of $51.22 on Thursday, while silver futures on the Comex were last at $48.1.
This price gap was wide enough to make it profitable for traders to bring silver back to London, analysts said.
“There is a real silver shortage in London, but there are 500 million ounces sitting on the Comex doing nothing,” Ryan Mangan, head of global metals and bulk trading at Macquarie, said at a briefing on Thursday.
Silver inventories on the Comex stand at 526.1 million ounces, close to the record high of 531.9 million ounces reached on October 3.
“So much silver has gone to the US that it has now stockpiled almost four years of domestic demand,” said Adrian Ash, head of research at online marketplace BullionVault. “Rent rates in London are just over 11%, which is extraordinary.”
Silver lease rates represent the cost of borrowing physical silver and are an indicator of demand.
A precious metals trader said these prices were high due to low liquidity in London due to a recent increase in demand from silver-backed exchange-traded funds, which came on top of earlier flows into the US.
The impact of the London market squeeze is already being seen in India, where Kotak Mahindra Asset Management Company temporarily halted new bulk investments in its silver ETF fund on Thursday to protect investors.
Metals markets expect to hear next week about an investigation into potential tariffs on critical mineral imports ordered by the United States President Donald Trump In April. But a government shutdown could delay any decision.
“I don’t think the market will send back much unless the tariff consequences are very clear,” said independent metals trader Tai Wong.
(Reporting by Ashitha Shivaprasad in London; Additional reporting by Polina Devitt; Editing by Pratima Desai and Emelia Sithole-Matarise)
