The United States will temporarily not impose tariffs on "critical minerals". JPMorgan: Silver has held up for now, but the risk of a pullback is significant; this is an opportunity for gold.
J.P. Morgan’s latest research report indicates that the 232 key minerals executive order adopts a relatively mild regulatory stance, and has not yet imposed tariffs on precious metals such as silver. This policy environment is positive for the market. The bank maintains a strong bullish outlook for gold, but warns that the silver market faces significant correction risks.
According to Wind Trading Desk, the report analyzes that multiple warning signals have emerged in the silver market: prices have sharply deviated from fundamental forecasts, ETFs are experiencing continuous net capital outflows, industrial demand is under pressure, and supply outside the U.S. is becoming more plentiful. Of particular note, since Christmas, silver prices have risen by about 25%, while ETFs have experienced a net outflow of approximately 18 million ounces during the same period, indicating a rare market divergence.
Tariff Postponed
President Trump signed an executive order on key mineral imports under Section 232 of the Trade Expansion Act, declaring them a national security threat, but has not immediately implemented tariff measures. The order sets a 180-day negotiation window, requiring bilateral discussions to adjust the flow of key mineral trade, and authorizes the adoption of alternative regulatory tools, including price floors.
J.P. Morgan notes that this executive order sends a relatively soft regulatory signal, forming a stark contrast with previous Section 232 cases that directly imposed a 50% tariff on refined copper products. Although the order retains the possibility of future tariffs, the current policy clearly focuses more on targeted regulation of rare earth products, and does not directly target precious metals.
The institution believes this reflects a policy approach of “negotiation before taxation”, which both retains tariffs as a bargaining chip for subsequent talks and provides the market a cushion for adjustment by setting a buffer period. Compared to market fears of broad tariff measures, this outcome is seen as a policy path with minimal impact on areas like precious metals.
Accelerated Inventory Flows
Although the market generally expects silver is unlikely to be subjected to tariffs, the explicit policy signal further eases related concerns and reduces the pressure for risk-averse inventory movements from New York to London.
Data show that COMEX silver inventory has fallen approximately 100 million ounces from a peak of about 530 million ounces in early October to roughly 430 million ounces. Notably, since January this year, outflow has clearly sped up, with daily average outflows recently close to 2 million ounces. Even so, current inventory is still about 125 million ounces higher than pre–2024 U.S. election levels. In scale, this inventory increase is roughly equal to 15% of global annual silver mine supply.
A similar trend is observed in the platinum group metals market. COMEX platinum inventory remains about 525,000 ounces higher than pre-election levels (an increase of nearly five times), while palladium inventory is about 170,000 ounces higher. Overall, although inventory recirculation is beginning to show, structural inventory pressure in key metal markets has not yet been fully alleviated.
Industrial Demand Under Pressure
The report states that industrial demand is facing increasingly severe pressure. As early as last December, J.P. Morgan warned that rising silver prices might threaten 50–60 million ounces of solar industry demand in the coming years. As silver prices continue to climb, cost pressures are further highlighted.
Currently, the cost of silver raw materials accounts for about 30% of the total selling price of solar panels; even with terminal product price hikes, it is still difficult to fully pass on the rapid cost increase. Industry countermeasures are gradually being implemented, with many leading photovoltaic companies announcing accelerated adoption of copper-for-silver substitution technology, with related capacity conversion expected to be gradually implemented from the second quarter.
Meanwhile, investment-side demand structure is also undergoing significant change. Although global silver ETF positions are expected to increase by 278 million ounces in 2025—a year-on-year increase of 27%—since the end of last year there has been a clear price-volume divergence: silver prices rose nearly 25% after the holidays, while major silver ETFs saw a net outflow of about 18 million ounces during the same period. This sharply contrasts with the “price and volume rising together” pattern in the second half of last year, and COMEX managed-money net long positions have continued to decrease since mid-December, reflecting institutional investors’ increasingly cautious attitude.
Supply Eases
As more silver inventory is shifted from New York to London, spot market liquidity is improving. Even before this week's Section 232 announcement, this trend had already begun to relieve tight conditions in the forward market. While the London OTC forward curve still shows spot premiums (backwardation) for longer maturities, as inventory continues to move to London, the price spread is expected to gradually narrow, which could eventually systematically ease conditions in the U.S., previously the most stressed core market and a key factor supporting relative silver strength.
According to LBMA data, since last September total silver held in London vaults increased by about 104 million ounces, an amount similar to the COMEX inventory decline over the same period. However, Metals Focus notes that freely circulating (non-ETP held) silver inventory rose about 60 million ounces, from a low of 136 million ounces at the end of September to nearly 200 million ounces at year's end.
Bullish on Gold
J.P. Morgan explicitly states it favors gold over silver, and holds a stronger bullish conviction for gold.
So far this year, gold ETFs have shown steady capital inflows. Investors are turning to gold to hedge multiple key risks: potential challenges to Federal Reserve independence, intensifying geopolitical turmoil, the impact of IEEPA tariff rulings on the U.S. fiscal deficit, and potential U.S. government shutdown risk at the end of January.
Central bank gold demand shows remarkable resilience. In September, October, and November 2025, monthly net purchases each exceeded 40 tons—making it the strongest quarterly performance last year. Notably, Brazil’s central bank resumed gold purchases in September for the first time since mid-2021, accumulating over 40 tons by the end of November; Poland’s central bank bought nearly 100 tons of gold in 2025, raising the proportion of gold in its foreign exchange reserves to about 30%, and its governor is seeking approval to add another 150 tons.
On the price trend, gold prices are already running about a quarter ahead of J.P. Morgan’s baseline forecast, which previously estimated the average gold price would reach $5,000/oz in Q4 2026. If the aforementioned risk factors continue to ferment and hedging demand further increases, gold prices could reach that target earlier than expected. According to J.P. Morgan’s May 2025 analysis, just shifting 0.5% of foreign-held U.S. assets to gold—equivalent to about $1.7 billion in incremental quarterly demand—could push gold prices up by $6,000.
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