Why has silver surged? UBS: China is the only reason.

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The silver market has seen a clear rise recently, with its driving forces highly concentrated—Chinese demand is currently dominating price movements, while uncertainty from U.S. tariff policies is marginally amplifying market volatility.

The price of silver recently broke above $85 per ounce, reaching a new high for over two months. Meanwhile, the Shanghai silver premium has risen again to above $10 per ounce, indicating strong attraction for physical metal in the Chinese market.

Andrew Matthews, Global Head of Precious Metals Distribution at UBS, pointed out directly that China is currently the only source of silver demand, and uncertainty from U.S. tariff policy is creating additional chaos in the market structure.

While prices are strengthening, UBS precious metals strategist Joni Teves is maintaining her year-end forecasts—gold at $6,000 and silver at $100, citing that the underlying logic supporting precious metals remains intact: continued inflows from retail and institutional investors, and persistent central bank gold buying, which is unlikely to reverse.

A Concentrated Explosion of Chinese Demand

Since the beginning of this year, China’s role in the silver market has changed noticeably. Over the past five years, China had long been a net exporter of global silver concentrate, but a clear reversal in flows occurred in 2026.

China’s silver imports in March reached 528 tons, the largest single-month figure in nearly twenty years, turning China from a supplier into a temporary absorber of metal demand.

The concentrated demand burst comes from two directions: first, retail investors buying large amounts of small silver bars, viewing them as alternatives to high-priced gold; second, solar manufacturers stocking up ahead of the April 1st cancellation of export tax rebates. The solar industry consumes about one-fifth of global annual silver supply, with production highly concentrated in China.

However, Zijie Wu, an analyst at Jinrui Futures in Shenzhen, is cautious about the sustainability of this import frenzy. He said, "Explosion-level import volumes definitely cannot last," and future imports will return to normal levels, adding that since China is itself the world’s largest silver producer, there is no long-term supply-demand imbalance in the silver market.

New York Inventory Tightening, Market Structure Turns Sensitive

Alongside the surge in Chinese demand, New York’s silver inventory is steadily declining. CME stockpiles accumulated last year due to tariff expectations have been gradually digested, with metal flows shifting from New York back to London and Zurich, and holdings in LBMA vaults have rebounded.

Andrew Matthews notes that the effective delivery buffer in New York has thinned. Once the metal leaves New York, it’s not easy to move it back; the importance of the source of the metal and customs procedures increases accordingly. When inventories are abundant, these details have limited impact; but in today’s low liquidity environment, any marginal uncertainty can leave its mark on market structure rather than directly reflecting in spot prices.

This also explains the return of basis volatility, the strengthening of EFP (Exchange for Physical), and the ongoing tightness in London’s OTC market.

Misreading Effects of Tariff Policy

Uncertainty in U.S. tariff policy is another disturbance factor for current market sentiment, but its impact mostly comes from market misreading, rather than any substantive policy change.

There is no unified customs code for U.S. silver imports. Market participants use multiple codes, including 7106.91.10 for unworked metal and 7106.92.1000 for semi-finished products. In January this year, a U.S. Customs ruling reaffirmed that certain silver bars are treated as semi-finished products, but the ruling was transaction-specific and did not change the overall rules—it simply highlighted the subjective nature of classifications, and the risk of reclassification remains objective.

Meanwhile, the statutory four-year review period for Section 301 is underway, with application windows for actions from July and August 2018 extended to July and August this year. Matthews believes that the base scenario is a calm conclusion to this review process, but the market often reacts to uncertainty before the outcome becomes clear.

He also notes that confusion between Section 232 and the Critical Minerals Framework has heightened the market’s cautiousness toward silver of Chinese origin, although neither actually changes the import handling of silver. "Market impacts are driven by misreading, not by policy action itself."

Short-term Strength, Structural Support in Question

Taking all the above into account, Matthews' short-term view is: the tightness in the OTC market may persist, EFP will remain volatile, and there is a short-term upward tilt to spot prices. But he also emphasizes that global demand fundamentals outside China show no significant improvement; the current price strength driven by liquidity mismatches and policy misreading is more likely to be temporary rather than structural.

The key issues investors need to watch are: where the metal is stored, whether it can be moved conveniently, and how the uncertainty of classification and handling affects marginal behavior in a thin delivery buffer environment.

Joni Teves remains optimistic from a longer-term perspective, believing that the theme of diversified allocation remains intact, with continuous inflows from retail and institutional investors and central bank gold buying providing underlying support for precious metals. Her year-end forecast for silver at $100 per ounce remains unchanged.

Risk Warning and DisclaimerThe market has risks; investment must be made cautiously. This article does not constitute personal investment advice, nor does it take into account the special investment objectives, financial status, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article suit their particular circumstances. Investing based on this, responsibility rests with the user. ```