Silver squeeze subsides, London inventory posts largest increase in at least nine years, spot premium narrows.

Silver reserves in London vaults saw the largest increase in at least nine years in October, easing previously extremely tight supply conditions, which had driven London silver prices much higher than those in Shanghai and New York.

London’s vaults, which support the local market, added nearly 54 million troy ounces of silver in October, a weight equivalent to more than 100 iconic London double-decker buses. This silver was shipped to London as a result of historic arbitrage opportunities triggered by the tight market, causing inventory in other regional warehouses to be transferred.

Earlier this year, concerns over tariffs led to a large flow of silver from London to New York, pushing London silver stocks to historic lows. By early October, surging demand from India and heavy buying from silver ETFs left the market unable to supply enough, causing London spot silver prices to reach a premium of up to $3 per ounce over other markets.

This created highly attractive arbitrage opportunities for traders able to quickly withdraw silver from the U.S. and airfreight it to London.

Rhona O’Connell, Head of Market Analysis at StoneX Financial Ltd., indicated in a report that the huge increase in London vault stocks “undoubtedly shows that arbitrage played a role, drawing metal from overseas back to London.” Additionally, with the upcoming Indian wedding season, which typically drives silver demand, the market may remain tight in the short term.

The latest inflows of silver have eased the tightness in London’s market, and currently London spot prices are slightly below New York futures prices. During October, about 48 million ounces of silver were withdrawn from New York’s Comex vaults.

According to Bloomberg compiled data, silver ETFs saw a net outflow of around 15 million ounces in October, with most such ETFs storing their silver in London.

These inflows have restored abundant supply to a market that just a month ago was extremely tight.

Daniel Ghali, commodity strategist at TD Securities who previously warned this year that “demand may exceed supply”, now estimates that the quantity of freely available silver for buying or borrowing in the market is close to 200 million ounces. Ghali stated that the amount of new silver in London surpassed the outflows from New York, Shanghai, and ETFs, meaning part of the supply may have come from private vaults or recycled silver. This marks the end of this round of “silver squeeze”.

However, the cost to borrow silver in London remains elevated, with a one-month annualized silver borrowing rate around 5%, though that is far below the crisis peak of over 30% in October.

Ruth Crowell, CEO of the London Bullion Market Association (LBMA), said at a conference that this round of stress accelerated the plan to publish weekly silver inventory data. Currently, London market gold and silver inventory data is released monthly.

It should also be noted that tariff risks have not disappeared. The U.S. has included silver in the Trump administration’s Section 232 investigation list of critical minerals, which may lead to related tariffs and trade restrictions.

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