World

Silver Surge: How US and China Flows Rescued London’s Market, But Is It Enough?

Silver flows from US & China eased London’s squeeze. Prices eased after hitting records. Demand remains high.

byAndres Castro

October 20, 2025, 5:00 PM

A close-up view of multiple rows of shiny, one-kilogram fine silver bars, neatly stacked and stored.

Rows of stamped 1000g fine silver bars, a tangible precious metal investment. By MDL.

Executive Summary

Large silver flows from the United States and China have alleviated a significant liquidity squeeze in London’s spot market, which previously caused prices to trade at a premium over U.S. Comex futures.

Despite the easing of immediate pressure, London’s silver inventories are largely “spoken for,” with an estimated 83% allocated to silver-backed exchange-traded funds, and benchmark silver prices recently hit a record high.

Strong global demand, particularly from India due to its festive season and supply shortages, and ongoing ETF allocations continue to exert pressure on the silver market, leading to significant outflows from China and U.S. stock reductions dependent on upcoming tariff decisions.

The Story So Far

London’s spot market, the world’s largest over-the-counter precious metals hub, has been grappling with a significant silver liquidity squeeze, largely because most of its existing vault inventories were already allocated, predominantly to silver-backed exchange-traded funds. This shortage has been further intensified by robust global demand, particularly from India, the world’s largest consumer, which is experiencing its own supply deficit during its festive season, thus creating high premiums that made expensive air freight deliveries from the U.S. and China profitable to ease the immediate pressure.

Why This Matters

While large silver flows have temporarily alleviated a significant liquidity squeeze in London, this relief is likely to be short-lived given persistent robust global demand, particularly from India and silver-backed exchange-traded funds, which continue to absorb available supply. This situation highlights the interconnectedness of global precious metals markets, where regional supply-demand imbalances and factors like potential U.S. tariff decisions can quickly impact prices and availability worldwide, suggesting ongoing volatility.

Who Thinks What?

Traders and analysts confirm that the immediate pressure on London’s silver market has largely subsided due to significant inflows of silver from the U.S. and China, leading to an easing of short-term borrowing rates.

Morgan Stanley Commodities Strategist Amy Gower and consultancy Metals Focus highlight that despite London’s large silver inventories, most of this metal is already “spoken for,” with a substantial portion allocated to silver-backed exchange-traded funds, indicating persistent underlying demand.

Metals Focus emphasizes that robust global demand, particularly from India due to its festive season and supply shortage, creates competition for silver and continues to exert upward pressure on prices, limiting the full alleviation of global supply tightness.

Large flows of silver from the United States and China have begun to alleviate a significant liquidity squeeze in London’s spot market, the world’s largest over-the-counter precious metals trading hub. This influx over the past week follows a period where a shortage of available metal in London drove silver prices to a premium over U.S. Comex futures, making expensive air freight deliveries profitable for sellers.

Market Response and Price Dynamics

Traders and analysts confirm that the immediate pressure on the London market has largely subsided. Independent metals trader Tai Wong estimated that approximately 15 million-20 million troy ounces (311-467 metric tons) of U.S.-based silver arrived in London recently. Another source indicated at least 1,000 tons of silver entered London vaults from both the U.S. and China.

The market tightness, coupled with surging gold prices and robust demand from India, pushed benchmark silver prices to a record $54.47 per troy ounce on Friday, though they slightly receded to just under $52 by Monday. Concurrently, short-term silver borrowing rates in London, which had reached record highs on October 10, eased by Friday.

London Inventories and ETF Allocation

As of the end of September, London vaults held 24,581 tons of both allocated and unallocated silver, valued at $36.5 billion, according to the London Bullion Market Association. However, Morgan Stanley Commodities Strategist Amy Gower noted that most of these inventories are already “spoken for.” Consultancy Metals Focus estimates that a substantial 83% of silver in London vaults was allocated to silver-backed exchange-traded funds by the end of September.

U.S. Outflows and Tariff Uncertainty

Since hitting a record high of 16,543 tons (531.9 million troy ounces) on October 3, approximately 697 tons of silver have left Comex warehouses in the U.S. Comex inventories had previously surged earlier in the year due to uncertainties surrounding potential U.S. import tariffs. Further outflows from U.S. stocks are anticipated to depend on the outcome of a U.S. probe into critical minerals tariffs, expected this month.

China’s Role and Global Competition

China, the world’s second-largest silver producer, has also seen significant outflows, with about 100-150 tons reportedly leaving the country in the past week. However, not all Chinese metal is destined for London, as the UK faces competition from India, the world’s largest consumer. India is experiencing its own supply shortage, exacerbated by its festive season, leading to “unprecedented levels” of climbing premiums and increased air freight, according to Metals Focus.

This global demand dynamic is reflected in China’s domestic market, where silver inventories in warehouses monitored by the Shanghai Futures Exchange fell by 249 tons last week to 920 tons. This marks the lowest level since May and represents the largest weekly outflow in 11 years.

Market Outlook

The recent surge in silver flows into London has temporarily alleviated immediate liquidity concerns, but the underlying global demand, particularly from India and ETF allocations, continues to exert upward pressure. The market remains sensitive to geopolitical factors, such as U.S. tariff decisions, and regional supply-demand imbalances, highlighting the interconnectedness of global precious metals markets.