SOARING lease rates for silver are disrupting precious metals markets as traders brace for potential US tariffs that could further tighten already constrained London supplies, said Bloomberg News on Monday.
“The US market’s concern is that the metal might be subject to tariffs,” Bernard Dahdah, an analyst at Natixis told the newswire. “This demand for physical is in turn reducing the pool of available leasable material in London and as such lifting silver’s lease rate.”
Washington’s classification of silver as critical to national security last month has intensified speculation that President Donald Trump might target the white metal, particularly following his April investigation order into critical minerals.
The tariff fears have created significant price dislocations between trading centres. Silver futures on New York’s Comex now trade at a 70% premium above London’s benchmark spot price, whilst short-term borrowing costs in the UK capital have spiked above five percent for the fifth time this year – far exceeding historical near-zero levels.
Physical supplies were already strained, with European refiners prioritising gold bar recasting due to earlier tariff confusion. London inventories have also declined as investors flock to exchange-traded funds, which have posted gains exceeding 35% for gold and 40% for silver this year.
The supply squeeze mirrors earlier market disruptions that proved profitable for major banks including JPMorgan Chase and Morgan Stanley when Trump’s tariff agenda initially roiled commodity markets. September has seen unusually large delivery volumes planned against expiring Comex futures, predominantly for bullion bank clients, whilst warehouse inventories have reached their highest levels since 1992.
