Silver prices have surged to a two-month high, exceeding $85 per ounce, with UBS Group AG attributing the rally solely to demand from China. In March, China imported 528 tons of silver, the highest monthly volume in nearly two decades, driven by retail investors buying silver bars and solar manufacturers stockpiling ahead of the cancellation of export tax rebates. The combined effect of these factors has ignited demand. Uncertainty surrounding U.S. tariff policies has added to market turbulence, while declining inventories in New York have made the market structure more fragile. UBS maintains its year-end target for silver at $100 per ounce.
The recent significant rise in the silver market is primarily driven by concentrated demand from China, with uncertainty from U.S. tariff policies amplifying market volatility at the margins.
Silver prices recently broke through $85 per ounce, reaching a new high in over two months. Concurrently, the premium for silver in Shanghai has risen above $10 per ounce, reflecting strong demand for physical metal in the Chinese market.
Andrew Matthews, Head of Global Precious Metals Distribution at UBS, directly stated that China is currently the sole source of demand for silver, while uncertainty in U.S. tariff policies has created additional disruption at the market structure level.
Amid the price strength, Joni Teves, a precious metals strategist at UBS, maintains her year-end forecasts unchanged—$6,000 for gold and $100 for silver—citing that the underlying drivers for precious metals remain intact: sustained inflows from retail and institutional investors, and the trend of central bank gold purchases is unlikely to reverse.
**Concentrated Surge in Chinese Demand**
This year, China's role in the silver market has undergone a noticeable shift. Over the past five years, China has been a net exporter of silver concentrate, but a clear reversal in flow emerged in 2026.
China's silver imports in March reached 528 tons, the largest monthly import volume in nearly two decades, transforming China from a supplier of the metal to a temporary demand absorber.
The concentrated surge in demand stems from two directions: First, retail investors are purchasing small silver bars in large quantities as an alternative to high-priced gold. Second, solar manufacturers are stockpiling ahead of the cancellation of export tax rebates effective April 1. The solar industry consumes approximately one-fifth of the global annual silver supply, with production capacity highly concentrated in China.
However, Zijie Wu, an analyst at Jinrui Futures in Shenzhen, expressed reservations about the sustainability of this import surge. He stated, "The explosive import volume is certainly unsustainable," and added that imports will return to normal levels. He also noted that, given China is the world's largest silver producer, there is no long-term supply-demand imbalance in the silver market.
**Tightening New York Inventories and Sensitive Market Structure**
Coinciding with the surge in Chinese demand is the continued decline in silver inventories in New York. Inventories accumulated last year in anticipation of tariffs have been gradually drawn down, with metal flowing from New York back to London and Zurich, leading to a recovery in LBMA vault holdings.
Andrew Matthews pointed out that the effective delivery buffer in New York has thinned. Once metal leaves New York, bringing it back is not straightforward, increasing the importance of the source of the metal and customs handling methods. When inventories were ample, these details had limited impact. However, in the current low-liquidity environment, any marginal uncertainty can leave a mark on the market structure, rather than being directly reflected in spot prices.
This also explains the resurgence in basis volatility, the strengthening of the EFP (Exchange for Physical) premium, and the continued tightness in the London over-the-counter market.
**Misinterpretation Effects of Tariff Policies**
Uncertainty surrounding U.S. tariff policies is another factor disturbing current market sentiment, but its impact stems more from market misinterpretation than substantive changes in the policies themselves.
The U.S. does not have a unified customs code for silver imports, with market participants using multiple codes, including 7106.91.10 for unwrought metal and 7106.92.1000 for semi-manufactured products. In January of this year, a U.S. Customs ruling reaffirmed the treatment of specific silver bars as semi-manufactured goods. However, this ruling pertained to specific transactions and did not change the overall rules; it merely highlighted that classification involves subjective judgment, and the risk of reclassification objectively exists.
Simultaneously, the statutory four-year review process under Section 301 of the U.S. Trade Act is ongoing, with application windows for actions taken in July and August 2018 extending to July and August of this year, respectively. Matthews believes the baseline scenario is for this review process to conclude quietly, but markets often react to uncertainty before outcomes become clear.
He also noted that confusion between Section 232 and the critical minerals framework has heightened market caution regarding silver sourced from China, although neither provision has actually changed the handling of silver imports. "Market impact is driven by misinterpretation, not by policy actions themselves."
**Short-Term Strength, but Structural Support Questionable**
Considering the above factors, Matthews' short-term assessment is that tightness in the over-the-counter market may persist, EFP will remain volatile, and there is a short-term upward bias in spot prices. However, he emphasized that global demand fundamentals outside China have not shown significant improvement. The current price strength, driven by liquidity mismatches and policy misinterpretation, is more likely to be temporary rather than structural.
The core issues investors need to focus on are: where the metal is stored, whether it can be moved conveniently, and how uncertainties in classification and handling methods affect marginal behavior against the backdrop of a thin delivery buffer.
Joni Teves maintains an optimistic outlook from a longer-term perspective, arguing that the theme of diversification remains intact. Sustained inflows from retail and institutional funds, along with central bank gold purchases, form the underlying support for precious metals, keeping the forecast for silver to reach $100 per ounce by year-end unchanged.
**Risk Warning and Disclaimer**
Markets involve risks, and investment requires caution. This article does not constitute personal investment advice, nor does it consider the specific investment objectives, financial situations, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. Investments made accordingly are at the investor's own risk.
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