Spot silver has now broken through the £40/oz mark (£1285/kg), however this is somewhat arbitrary as the silver squeeze tightens. The current sky-high leasing rates mean the silver market is unable to operate and dealers unable to offload.

Leasing rates finance the movement of metal between banks (lenders) and bullion dealers (borrowers) whilst metal is in process (i.e. the time between receipt as a recycled metal and it becoming a refined and saleable commodity). The physical metal in London vaults therefore underpins all transactions. Leasing has traditionally been at rates of less than 1%, however high demand for silver over the past twelve months has seen rates rise and this was further exacerbated by the movement of physical metal to the USA following Trump’s threat of tariffs earlier this year, leading to rates of up to 7%. These were considered very high and unusually the cost was directly passed down the line to traders.

Last Thursday, due to a combination of exceptional factors including a rising industrial demand, safe-haven need and bullish investor activity meant that the quantity of physical silver used by the London Metal Exchange was stretched beyond breaking and the silver lease market effectively disappeared — with same-day leasing rates reaching as high as 160%. The market has been inoperative ever since and although large volumes of metal have been brought in to London, the signs are not good for a quick fix.

UKSE are continuing to buy silver at a contingency rate of £1/gram (£31.10/oz) from current clients and account holders only, however we are monitoring the market and will react as appropriate to any future changes.

Tighten your belts, we are in for a ride…