"Plunged During the War, Now Surging Again"... The Real Reason Behind the 6% One-Day Silver Market Rally [Weekend Money]

Two Chinese Brands Excluded from New York and London Exchanges

"Potential Reoccurrence of Physical Silver Shortage"

Recently, concerns over supply disruptions have caused silver prices to rise again. Analysts attribute this trend to forecasts that a “silver shortage” could reoccur after Chinese brands were excluded from the lists of Western exchanges.

According to LS Securities, silver prices plunged after the Iran crisis erupted in March, but began to rebound last month and have seen further increases in May. Hong Seongki, a researcher at LS Securities, explained, “Since March, silver prices have moved in tandem with gold,” adding, “After coming under downward pressure from rising U.S. interest rates and a stronger dollar due to higher oil prices, precious metal prices rebounded as the dollar weakened again.”

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In addition, the increase in silver prices is also linked to a ‘physical shortage.’ Researcher Hong stated, “The sharp rise in silver prices in May appears to indicate a recurrence of last year’s physical shortage in the silver market. In particular, on May 11, prices surged by more than 6%, reminiscent of the high volatility seen in January.”

Hong also highlighted that the New York Commodity Exchange (COMEX) and the London Bullion Market Association (LBMA) have suspended the delivery of stocks for two Chinese brands. Commodity exchanges present appropriate standards for traded items, and only goods from brands that meet these standards can be delivered, received, or stored on the exchange.

On the surface, this measure is said to have been taken after an audit firm issued a qualified opinion on last year’s Responsible Silver Compliance Report. However, Hong pointed out, “In reality, this move likely reflects efforts to build an economic bloc by isolating the Chinese silver market, amid geopolitical risks such as the possibility of U.S. tariffs that would increase delivery costs, and the risk of delivery failure due to Chinese government controls on silver exports.”

Such de-Chinaization measures are expected to reduce the amount of silver available on the market. “The exclusion of certain Chinese brands—which account for about one third of global refined silver production—from Western exchange lists suggests that physical silver shortages could reoccur at COMEX and LBMA,” said Hong. “Suspending deliveries from these brands means that 4% of total supply is now unavailable for delivery at the largest Western exchanges.” In fact, COMEX’s deliverable silver inventory has reportedly dropped to its lowest level in a year.

Furthermore, there is a possibility that the ‘Debasement Trade’ may resume. The debasement trade refers to the move into alternative assets such as gold and Bitcoin in response to the weakening of fiat currencies like the dollar. Hong explained, “The intention of Kevin Warsh, the next U.S. Federal Reserve chair, to shrink the balance sheet has raised expectations that the ‘monetization of debt’ will be curbed in the United States, which appears to have eased debasement trade.” However, he cautioned, “As market expectations shift, the resumption of the debasement trade could once again make the silver market vulnerable to speculation.”

This content was produced with the assistance of AI translation services.