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Silver markets are once again in turmoil as lease rates spike and supply channels tighten. Traders face renewed price dislocations between New York and London, driven by uncertainty over the policy direction of the United States. The fear of tariffs has transformed silver from a niche industrial and financial metal into a potential flashpoint within trade and national security debates.
Executive Order 232 as Catalyst
Over the weekend, President Trump signed Executive Order 232, a measure that clarified tariff policy on critical minerals. The order explicitly exempted gold from any tariff risk. Silver, however, was not mentioned in the final draft. That omission has sparked immediate speculation that silver remains vulnerable to duties.
Essentially, it is what Trump did not say in that order that has caused the nervousness. If silver is treated entirely as industrial and is tariffed, Bullion Banks dealing in Silver rehypothecation could lose access to precious collateral for carry trades and subsequently be caught in a “venue” short squeeze. This was mentioned in the GoldFix Market Rundown this AM.
The contrast is now shaping market behavior. Gold lease rates and exchange-for-physical (EFP) spreads have been narrowing as clarity reduces uncertainty, while silver’s omission has driven the opposite effect. Silver’s lease rates and EFPs are widening, reflecting both the regulatory ambiguity and the scramble to secure immediate supply.
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The source of this report is Bloomberg, authored by Sybilla Gross. It highlights how President Donald Trump’s critical mineral policy has introduced fresh volatility into silver markets, adding new layers of complexity for refiners, dealers, and investors.
Bob Coleman of Idaho Vaults notes: SLV ETF Alert Tightness building in Silver. Borrowing fee to short SLV ETF beginning to rise. Lease rates in London at 5%. Price has been the relief valve in the past.
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Tariffs and the Critical Minerals Framework
Washington’s decision to classify silver as critical to national security last month set the stage for the current disruption. The classification raised concerns that tariffs could soon apply, sparking defensive positioning. Trump’s earlier April order to investigate critical minerals was the immediate trigger.
“The US market’s concern is that the metal might be subject to tariffs,” Bernard Dahdah, an analyst at Natixis, said in an emailed note.
In anticipation, New York futures rose above the international benchmark as traders priced in risk premiums. Metal holders responded by shipping supplies into the US, tightening London’s pool of available material. The result has been a sharp lift in lease rates, magnifying the supply crunch.
Refiners, Inventories, and ETF Flows
The squeeze on silver was intensified by European refiners’ focus on recasting gold bars, a diversion of capacity prompted by tariff-related confusion. At the same time, London inventories declined as investors increased allocations to exchange-traded funds. These gold and silver ETFs have gained more than 35% and 40% year-to-date, further reducing physical market liquidity.
Market Structure Pressures
The immediate effects are visible in pricing spreads. Silver futures on Comex are trading at a premium of about 70 cents to London spot prices. Meanwhile, short-term borrowing costs for silver in London have spiked above 5% for the fifth time in 2025, compared to a long-term average close to zero.
Forward curves also reflect stress. One-year silver prices have fallen below current spot levels, a rare inversion that indicates stronger demand for immediate delivery. Dealers may be accelerating shipments to the United States in advance of potential levies.
Historical Context of Arbitrage Opportunities
Earlier in the year, similar price distortions created significant trading opportunities.
It was price ructions like these that helped traders at top banks including JPMorgan Chase & Co. and Morgan Stanley mint money earlier this year.
During that period, Trump’s tariff policies generated an unusually wide spread between London and New York, drawing large bullion inflows into the United States. However, once precious metals were temporarily exempted from duties in April, the trade rapidly collapsed. The recurrence of such dynamics underscores the fragility of the current market balance and the vulnerability of silver to political intervention.
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