In today’s issue:

  • There’s a fundamental shift underway for silver
  • A powder keg of potential price action
  • Is a historic bull run brewing?

Gold is stealing the headlines, but silver might be the real story no one is talking about.

As you’ll have seen, gold prices have surged to record highs. This has been driven by concerns over potential US tariffs and a growing bullion stockpile in New York that has created a shortage in London.

The market is abuzz with speculation about how these factors will impact the gold market moving forward.

But while gold grabs all the attention, something at least as dramatic is unfolding in silver. The same forces at play in the gold market – tariff threats and shifting inventories – might be hitting silver even harder, and the potential for a squeeze is much greater.

Just like in gold, silver is disappearing from London’s bullion vaults at an alarming rate.

But, just like in gold, it’s not just vanishing into thin air. Silver is being hoovered up by the Comex exchange in New York, which is quietly sourcing vast amounts of physical silver from London.

The threat of tariffs against Mexico and Canada is helping to drive precautionary flows of bullion from London to Comex warehouses. This is evidenced by substantial premiums on Comex futures over spot prices in London, leading to large bullion shipments from London.

Front-month Comex silver futures are now trading at $1.20-an-ounce premium over spot bullion prices. This significant price difference has created a powerful incentive for traders to move physical silver from London to New York, where they can cash in on the higher prices.

As a result, Comex silver inventories have jumped 15% since early December.

Source: Ole S Hansen, X.com

“Silver is [flowing in] at the same rate as Covid,” says strategist Nicky Shiels at Swiss bullion refining and finance group MKS Pamp.

Elsewhere, signs of stress in the physical silver market are becoming increasingly apparent.

One key indicator is the widening spread between futures prices and spot prices, known as the Exchange for Physical (EFP) premium. This premium has been spiking to unusual levels, suggesting a growing disconnect between paper contracts and physical metal.

Source: Bloomberg, GoldBroker

Traditionally, investors engage in silver futures contracts without intending to take physical delivery. However, recent trends indicate a surge in traders opting to convert these contracts into actual silver holdings.

Another red flag is the tightening of lease rates in the London silver market. These rates, which reflect the cost of borrowing physical silver, have been creeping up. This indicates a scarcity of readily available metal.

But while President Trump’s tariff threats have certainly contributed to market jitters, the underlying dynamics suggest a more fundamental shift could be underway.

You see, amidst this turmoil, one fact stands out: the silver market is facing its fifth consecutive year of deficit in 2025. This ongoing imbalance between supply and demand is creating a perfect storm for silver prices, and savvy investors are taking notice.

The Silver Institute projects that industrial demand will hit record highs this year, driven by sectors such renewable energy and automotive technology. With supply struggling to keep pace, the stage is set for potentially significant price appreciation.

The global physical silver market appears to be facing a genuine shortage, with demand outstripping available supply.

“There is no doubt that the market is going into a steepening deficit,” says Rhona O’Connell at brokerage StoneX, “and supply is not necessarily flexible enough to feed that demand [because] only 23% of silver supply comes from primary mine production.”

For silver investors, the current market conditions present a potentially lucrative opportunity. With physical supplies tightening and industrial demand showing no signs of slowing, the stage is set for a potential price breakout.

Of course, the silver market is notoriously volatile. While the fundamentals appear strongly bullish, investors should be prepared for potential short-term fluctuations.

If the flows from London to New York are primarily an arbitrage strategy – when an asset is simultaneously purchased and sold in different markets to profit from the price difference – then we can expect to see the transferred silver re-entering the market once the price gap narrows. This could potentially stabilise or even suppress prices.

But one thing seems clear: the combination of persistent deficits, surging industrial demand, the threat of tariffs and the ongoing raid on London’s vaults has created a powder keg of potential price action.

“The flood of silver from London to New York is the biggest story in commodities right now,” says Daniel Ghali, senior commodity strategist of Canadian brokerage TD Securities, forecasting an end-2025 price of $40 per ounce as the drawdown of inventories in global hub London exacerbates silver’s widening deficit of supply versus demand.

For those willing to navigate the complexities of this evolving market, the rewards could be substantial. As always, thorough research and a clear understanding of the risks involved are essential.

So while Trump’s tariff threats may have been the initial spark, the fire now burning in the silver market might end up fuelling much deeper, structural forces.

As physical silver becomes increasingly scarce and valuable, we may be witnessing the early stages of a historic bull run in this often-overlooked precious metal.

Until next time,

James Allen
Contributing Editor, Fortune & Freedom