Silver's "rise and fall" suggests that interest rate cut bets have been fully made, so why is silver still rising?
2025-09-10 21:46:41
On Wednesday (September 10), during the European and American sessions, affected by the U.S. PPI being significantly lower than expected, New York silver futures quickly rose by 0.3% to a high of $41.72 per ounce. Driven by investment demand, silver has risen sharply this year, and the price of silver continued to run near a 14-year high, but after the news was released, the price of silver quickly pulled back to the previous price of 41.54.
Market reactions have repeatedly hinted at investors' expectations of a US interest rate cut, as well as data supporting it. The market may have already fully priced in this. Consequently, when discussing silver's future performance, the market has refocused on its fundamental properties, with its industrial value and the resulting silver leasing business becoming key perspectives on silver prices. The continued rise in leasing rates suggests a shortage of spot silver. As of press time, New York silver futures have subsequently surged, currently trading at 41.68, up 0.86%.
Late last week, President Donald Trump signed an executive order explicitly exempting certain key metals, including gold, graphite, tungsten, and uranium, from tariffs. However, analysts pointed out that silver was not included in this official exemption list.
This policy uncertainty has directly triggered a sharp jump in silver lease rates. Bernard Dahdah, precious metals analyst at Natixis, noted that silver forward rates are already in an abnormal range, currently stabilizing at around -1.2%, meaning that spot silver is significantly more expensive than futures.
He explained: "In layman's terms, this means that when a silver borrower completes a USD/Silver swap with their counterparty, they not only fail to earn interest, but must instead pay costs to the counterparty (when silver demand is low, traders can benefit from the spread between USD interest and the silver lease rate by leasing silver and then exchanging it for USD). Meanwhile, the silver lender earns an annualized yield of approximately 5.5% for a three-month lease."
Daha pointed out that since silver was included in the US government's list of critical minerals last month, its leasing rates have started to rise again - this signal directly confirms that the market supply and demand tensions have intensified again.
He further added that this new property of silver may attract the attention of President Donald Trump, who ordered the launch of a special investigation into critical minerals as early as April.
He emphasized, "Since the implementation of this policy, the spread between the spot and futures (EFP) prices of silver, the exchange rate between the New York Mercantile Exchange (COMEX) and the London spot market, has climbed from its historical average of 25 cents per ounce to $1.1 per ounce. This data clearly demonstrates that the demand for physical silver in the US market has entered an extremely strong range. This surge in physical demand has further reduced the inventory of silver available for leasing in the London market, ultimately driving up silver leasing rates."
According to market news, this is the fifth time that silver leasing rates have suddenly surged this year.
Some analysts believe that it is not surprising that the silver market is showing such tension. The core logic is that the physical silver inventory of the London Bullion Market Association (LBMA) has dropped to an extremely low level.
In a recent strategy report, commodity analysts at TD Securities pointed out that current silver inventories may be exhausted within 7 months; if the investment demand for silver ETFs (exchange-traded funds) is further released, these inventories may even be exhausted within 4 months.
The arbitrage space between the New York futures contract and the London spot price can also directly reflect the degree of market tension - the current price of silver futures contracts for delivery in December is 55 cents per ounce higher than the spot price.
While tightness in the silver market is likely to persist, Daha said he expects lease rates to fall within the next month. Furthermore, while silver's exposure to tariffs has increased, some analysts believe the probability of such a risk materializing is low.
From the perspective of supply and demand fundamentals, the United States' domestic silver production can only cover three-quarters of domestic demand. The country needs to import an additional 1,000 tons of silver each year to fill the supply and demand gap.
Daha said: "The Section 232 investigation report on critical minerals is scheduled to be released around mid-October, and it is likely to include relevant recommendations on silver - which may or may not involve the imposition of tariffs. After the release of this report, silver lease rates may enter a rapid decline channel; if a public reassurance statement is issued in advance, it will also have a similar easing effect."
New York silver futures have currently broken through the upper track of the rising channel and crossed the original X-line. Currently, both trend lines have become support for silver prices.
Meanwhile, KDJ and MACD are both in bullish territory, with no MACD divergence. Silver prices are expected to fluctuate upward based on the two trend lines, waiting for the 10-, 20-, and 30-day moving averages to gradually move upwards, and continue the upward trend.
(New York silver futures daily chart)
Another thing to note is that the gold-silver ratio is around 89, higher than the long-term level of around 65. Combined with the aforementioned shortage of US spot silver supply, New York silver futures may continue to rise.
(Gold-Silver Ratio Trend Chart)
We need to pay attention to the Section 232 investigation report on critical minerals to be released around mid-October.
At 21:44 Beijing time, New York silver futures were trading at $41.68 per ounce, and spot silver was trading at $41.20 per ounce.
Market reactions have repeatedly hinted at investors' expectations of a US interest rate cut, as well as data supporting it. The market may have already fully priced in this. Consequently, when discussing silver's future performance, the market has refocused on its fundamental properties, with its industrial value and the resulting silver leasing business becoming key perspectives on silver prices. The continued rise in leasing rates suggests a shortage of spot silver. As of press time, New York silver futures have subsequently surged, currently trading at 41.68, up 0.86%.
Policy uncertainty triggers a jump in silver leasing rates
Late last week, President Donald Trump signed an executive order explicitly exempting certain key metals, including gold, graphite, tungsten, and uranium, from tariffs. However, analysts pointed out that silver was not included in this official exemption list.
This policy uncertainty has directly triggered a sharp jump in silver lease rates. Bernard Dahdah, precious metals analyst at Natixis, noted that silver forward rates are already in an abnormal range, currently stabilizing at around -1.2%, meaning that spot silver is significantly more expensive than futures.
He explained: "In layman's terms, this means that when a silver borrower completes a USD/Silver swap with their counterparty, they not only fail to earn interest, but must instead pay costs to the counterparty (when silver demand is low, traders can benefit from the spread between USD interest and the silver lease rate by leasing silver and then exchanging it for USD). Meanwhile, the silver lender earns an annualized yield of approximately 5.5% for a three-month lease."
Silver EFP spread widens significantly, indicating strong physical demand
Daha pointed out that since silver was included in the US government's list of critical minerals last month, its leasing rates have started to rise again - this signal directly confirms that the market supply and demand tensions have intensified again.
He further added that this new property of silver may attract the attention of President Donald Trump, who ordered the launch of a special investigation into critical minerals as early as April.
He emphasized, "Since the implementation of this policy, the spread between the spot and futures (EFP) prices of silver, the exchange rate between the New York Mercantile Exchange (COMEX) and the London spot market, has climbed from its historical average of 25 cents per ounce to $1.1 per ounce. This data clearly demonstrates that the demand for physical silver in the US market has entered an extremely strong range. This surge in physical demand has further reduced the inventory of silver available for leasing in the London market, ultimately driving up silver leasing rates."
According to market news, this is the fifth time that silver leasing rates have suddenly surged this year.
TD Securities warns stocks could run out in 7 months
Some analysts believe that it is not surprising that the silver market is showing such tension. The core logic is that the physical silver inventory of the London Bullion Market Association (LBMA) has dropped to an extremely low level.
In a recent strategy report, commodity analysts at TD Securities pointed out that current silver inventories may be exhausted within 7 months; if the investment demand for silver ETFs (exchange-traded funds) is further released, these inventories may even be exhausted within 4 months.
The arbitrage space between the New York futures contract and the London spot price can also directly reflect the degree of market tension - the current price of silver futures contracts for delivery in December is 55 cents per ounce higher than the spot price.
The United States needs to import 1,000 tons annually to fill the gap between supply and demand
While tightness in the silver market is likely to persist, Daha said he expects lease rates to fall within the next month. Furthermore, while silver's exposure to tariffs has increased, some analysts believe the probability of such a risk materializing is low.
From the perspective of supply and demand fundamentals, the United States' domestic silver production can only cover three-quarters of domestic demand. The country needs to import an additional 1,000 tons of silver each year to fill the supply and demand gap.
Daha said: "The Section 232 investigation report on critical minerals is scheduled to be released around mid-October, and it is likely to include relevant recommendations on silver - which may or may not involve the imposition of tariffs. After the release of this report, silver lease rates may enter a rapid decline channel; if a public reassurance statement is issued in advance, it will also have a similar easing effect."
Technical Analysis
New York silver futures have currently broken through the upper track of the rising channel and crossed the original X-line. Currently, both trend lines have become support for silver prices.
Meanwhile, KDJ and MACD are both in bullish territory, with no MACD divergence. Silver prices are expected to fluctuate upward based on the two trend lines, waiting for the 10-, 20-, and 30-day moving averages to gradually move upwards, and continue the upward trend.
(New York silver futures daily chart)
Another thing to note is that the gold-silver ratio is around 89, higher than the long-term level of around 65. Combined with the aforementioned shortage of US spot silver supply, New York silver futures may continue to rise.
(Gold-Silver Ratio Trend Chart)
We need to pay attention to the Section 232 investigation report on critical minerals to be released around mid-October.
At 21:44 Beijing time, New York silver futures were trading at $41.68 per ounce, and spot silver was trading at $41.20 per ounce.
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