By Polina Devitt
LONDON (Reuters) -Large flows of silver from the U.S. and China to London’s spot market in the past week are easing a liquidity squeeze in the world’s largest over-the-counter precious metals trading hub, traders and analysts said.
A shortage of available metal in the London market helped drive silver prices to a premium over U.S. Comex futures a week ago, making deliveries by airplane – usually reserved for much more expensive gold – profitable for sellers.
“The major pressure is done for now,” said Tai Wong, an independent metals trader. He estimated that around 15 million-20 million troy ounces (311-467 metric tons) of U.S.-based metal had arrived in London over the past week.
SILVER PRICES, LONDON BORROWING RATES BOTH HIT RECORD
Another source familiar with the matter said at least 1,000 tons of silver had gone into London vaults from the U.S. and China.
As tightness in the London market coincided with surging gold prices and strong buying in India, benchmark silver prices hit a record $54.47 per troy ounce on Friday. They were just below $52 on Monday. [GOL/]
Meanwhile, short-term silver borrowing rates in London eased by Friday from record highs seen on October 10.
London vaults held 24,581 tons of both allocated and unallocated silver, valued at $36.5 billion, as of end-September, the London Bullion Market Association said.
According to Morgan Stanley Commodities Strategist Amy Gower, most London inventories are “spoken for” by silver-backed exchange-traded funds.
Consultancy Metals Focus estimates that 83% of silver held in London vaults had been allocated to ETFs as of end-September.
About 697 tons of silver has left Comex warehouses in the U.S. since stocks there hit a record high of 16,543 tons (531.9 million troy ounces) on October 3.
Comex inventories surged earlier this year due to uncertainty over U.S. import tariffs. Further appetite for U.S. stocks outflows depends on the results of a U.S. probe into potential import tariffs on critical minerals, which the market expects this month.
UK COMPETES WITH INDIA FOR SUPPLY
A China-focused precious metals trader said that about 100-150 tons were on their way out of China, the world’s second-largest silver producer after Mexico, as of the last week.
Not all the Chinese metal was heading to London, he said, as Britain had to compete with India, the world’s biggest consumer, which is also experiencing a shortage of available supply due to its festive season.
“Premiums in India have climbed to unprecedented levels, prompting increased air freight,” Metals Focus said.
Silver inventories in warehouses monitored by the Shanghai Futures Exchange fell 249 tons last week to 920 tons, the lowest since May. That was the largest weekly outflow in 11 years.
(Reporting by Polina Devitt; Editing by Jan Harvey)
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