Key Moments
- Shanghai silver arbitrage has been signaling strong Chinese buying interest, according to TD Securities Senior Commodity Strategist Daniel Ghali.
- Western market participants remain cautious following the conflict in Iran, even as Chinese demand has shown renewed momentum.
- London OTC markets are still accommodating this demand, with silver lease rates indicating improved metal availability and rising inventory coverage.
Contrasting Demand Dynamics Between China and the West
TD Securities Senior Commodity Strategist Daniel Ghali highlights a clear divergence in silver market behavior between China and Western markets. He points to Shanghai silver arbitrage as an indicator of firm Chinese appetite for the metal, at a time when Western investors have adopted a more guarded stance following the conflict in Iran.
According to Ghali, the current environment underscores a shift in where the strongest physical demand is emerging, with Chinese activity standing out against more restrained positioning elsewhere.
Shanghai Arbitrage and the Timing of Demand
Ghali underscores the role of Shanghai pricing signals in capturing the renewed strength of Chinese silver demand. He emphasizes that the arbitrage trend suggests a significant pickup in buying interest, following a period marked by what he describes as unprecedented retail demand in the early months of 2026.
He notes that this latest wave of demand began to build just before the outbreak of war in Iran, reinforcing the idea that Chinese buyers had already been stepping up their exposure to silver ahead of the geopolitical shock.
London OTC Market Conditions and Lease Rates
Despite the firm demand backdrop from China, Ghali observes that London over-the-counter markets continue to handle these flows effectively. He points to silver lease rates as evidence that metal availability has been improving rather than tightening in response to the renewed interest.
This development stands in contrast to the conditions seen earlier in the year, when the market context was markedly different and concerns around tightness in supply were more prominent.
TD Securities’ View on Global Silver Inventories
Against this backdrop, TD Securities maintains that global silver inventory coverage is on an improving trajectory. Ghali argues that the combination of robust Chinese demand, cautious Western participation, and accommodating London market conditions supports the firm’s assessment that inventory coverage in the global silver market is rising, despite the earlier period of strain.
Market Factors at a Glance
| Market Aspect | Current Observation |
|---|---|
| Chinese demand | Shanghai silver arbitrage indicates strong buying interest |
| Western investor stance | Cautious behavior following the conflict in Iran |
| London OTC market | Absorbing flows, with lease rates suggesting improved availability |
| Global inventory coverage | TD Securities sees coverage improving compared to earlier tightness |
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