As President-elect Trump considers implementing universal tariffs on precious metals, the global silver market faces unprecedented volatility. Analysts warn that the tariff threat is accelerating the flow of silver stocks to the US, which could lead to severe inventory shortages and drive prices up sharply.
Tariff Threat Intensifies Silver Market Turmoil
Ghali from TD Securities noted that the silver market is currently experiencing an "unprecedented situation". Although prices appear stable on the surface, global precious metals traders are moving metals from London and other major markets to the US to avoid potential tariff risks.
Ghali explained that this trend might deplete inventories at major global vaults, such as the London Bullion Market Association (LBMA), and disrupt the structure of the spot market. He stated, "If London’s inventories reach a critical level, the market could face significant challenges." It is estimated that of the 1 billion ounces of silver currently in London vaults, only 300 million ounces are available for free trading.
Silver Shortage Could Trigger Explosive Price Increase
Ghali said that the ongoing shortage of silver stocks could strongly support prices. He predicts that if the supply tightens further, silver prices could soar to $40 per ounce. "A similar situation has occurred in the markets for commodities like copper and palladium, and silver is now entering this pattern."
However, he also noted that current market prices do not reflect the severity of this potential crisis. He urged investors to closely monitor the monthly data released by the LBMA and closely analyze the rate of inventory depletion.
Signs of Recovery in the Gold Market
Talking about gold, Ghali mentioned that the physical market is showing signs of recovery. The tariff threat is causing currency devaluation pressures in Asian markets, while demand for physical gold is starting to warm up. Central bank gold purchases and the return of institutional investors are expected to be major drivers of future gold price increases.
Furthermore, Ghali is optimistic about gold's performance in the latter half of 2025. He noted that as the Fed resumes its interest rate cut cycle, the gold market will find stronger support. "The rate cuts at that time may exceed current market expectations, further driving gold prices up."
Future Outlook
Analysts broadly agree that the precious metals market is at a critical turning point. The risk of a silver shortage and uncertainty over tariff policies could push prices higher, while the gold market is expected to continue strengthening in the second half of 2025 due to changes in global economic and monetary policies.
Investors need to closely monitor global inventory dynamics, the direction of US policies, and changes in buying activity in major markets to cope with potential volatility in the future precious metals market.
