Silver slipped, as a Chinese exchange cut position limits and authorities there clamped down on high-frequency trading, cooling sentiment in mainland futures that had helped push global prices to a record. Gold steadied.
Spot silver fell as much as 5.1%, after a modest decline in the previous session. Regulators ordered bourses including the Shanghai Futures Exchange — the main metals platform — to remove servers operated by high-frequency traders from their data centers, according to people familiar with the matter. SHFE also lowered the maximum number of intraday opening positions for silver futures, after a bout of exceptional volatility.
While silver has been a hot topic among investors lately on Western social media, “it's really speculators in China that has been the main engine,” said Ole Hansen, head of commodity strategy at Saxo Bank AS. “We see that through exploding trade volumes in industrial metals and the elevated premium traders there are prepared to pay for silver over London.”
Silver is still up 12% this week, but began to pare gains after Washington on Wednesday refrained from putting import tariffs on critical minerals. The threat of levies on minerals including silver and platinum had been one among several drivers of a breakneck rally, but US President Donald Trump stopped short of imposing sweeping duties, while not ruling out doing so in future.
Still, the unpredictable nature of Trump's policymaking “suggests that the practice of keeping metal onshore in the US to back short futures positions is likely to persist,” consultancy Metals Focus said in a note.
The tariff pause appears to be just a minor speed bump for silver, rather than a serious threat to a rally that's seen it triple in value over the past year. The metal has hit successive record highs and is up by about a quarter this year, finding support from a broader rotation into commodities that's part of the debasement trade, where investors avoid currencies and government bonds on fears over ballooning debt levels.
Precious metals have rallied sharply this year on Trump's increasingly aggressive foreign policy, as well as renewed attacks on the Federal Reserve, with the Justice Department threatening Chair Jerome Powell with a criminal indictment. Weakening the central bank's independence and ability to rein in inflation would weigh on the dollar and Treasuries, highlighting the haven appeal of gold and silver.
Elevated price levels for silver tend to encourage recycling activity, which can increase the supply of scrap, consultancy Metals Focus said. However, a shortage of high-grade refining capacity has limited the speed at which this material can be returned to the market, it said.
Silver fell 2.9% to $89.7018 an ounce as of 3:06 p.m. in London. Gold added 0.1% to $4,618.92 an ounce, and is up around 2% for the week. Both platinum and palladium dropped at least 3%. The Bloomberg Dollar Spot Index was steady.
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