Silver market remains under strain amid tight physical supply
The silver market continues to show signs of heightened stress amid a shortage of physical metal and rising volatility, Qazinform News Agency reports.
According to former managing director and head of precious metals at JPMorgan Robert Gottlieb, implied silver lease rates in the London market exceed 7 percent per annum for three-to-six-month tenors and stand at around 6.75 percent for a one-year horizon. Such levels, he says, point to extremely tight liquidity in the physical silver market.
The expert highlighted a pronounced imbalance between the silver markets in the United States and the United Kingdom. He noted that prices for March silver futures in the U.S. and the cost of physical silver in London currently diverge significantly. In London, silver has become so scarce that it is effectively being lent at negative rates, which translates into roughly 7.3 percent on an annualized basis. At the same time, U.S. silver delivery contracts are trading at a premium of about 60 cents per ounce.
At first glance, this gap appears to offer an arbitrage opportunity. In practice, however, it is accompanied by substantial risks. Gottlieb stressed that the possible introduction of import tariffs at a level of 10 percent could sharply alter price relationships between the two markets and cause the spread to widen to as much as $5.8 per ounce, fully erasing any potential profit.
He added that even attempts to profit from shorter term trades do not eliminate these risks, as any unexpected tariff decision could disrupt supply logistics and financial settlements. As a result, the market has entered a state of deep imbalance between physical silver in London and the U.S. futures market, while the amount of metal available for trading continues to shrink.
The current situation reflects severe stress and a shortage of liquid silver. Against the backdrop of ongoing geopolitical and economic uncertainty, as well as a structural lack of physical metal, he maintains a positive outlook for both silver and gold.
Earlier, Qazinform News Agency reported that silver prices on the COMEX exchange had moved into a correction phase after a sharp rally and the setting of a new all-time high. As of December 30, silver was trading above $74 per troy ounce, after climbing above $82 earlier in the week.
