Traders are chartering cargo planes to fly bars from New York to London, a desperate measure that reveals how severe the physical silver shortage has become.
Since October 9, spot silver at $52.51 has traded above December 2025 futures at $51.05, inverting the normal market structure where futures command premiums due to storage and financing costs. The persistent backwardation, combined with London lease rates that spiked as high as 39% and widespread physical shortages from India to Australia, has prompted Bank of America to raise its 2026 silver forecast to $65, the first major bank to make such a bullish call.
Spot silver (orange line) trades above Dec 2025 and Mar 2026 futures
London’s Liquidity Crisis Reaches Critical Mass
The epicenter of this dislocation is London, where silver lease rates exploded to 39% on October 9 before moderating to 11%. Even at current levels, borrowing costs remain extraordinarily elevated compared to typical rates below 1%. The numbers expose a fundamental problem: there isn’t enough physical silver available to meet demand in the world’s most important precious metals trading hub.
London silver prices are trading $1.55 above New York Comex prices, an arbitrage gap that normally would close within hours as metal flows to the higher-priced market. Instead, the spread persists because traders face a critical bottleneck: uncertainty around Section 232 tariff investigations. Silver was added to the U.S. critical minerals list in September 2025, making it potentially subject to import tariffs up to 50%. Shipping metal to London risks getting caught if tariff rules change mid-transit, destroying profits overnight.
Hence the extraordinary solution: air freight. Flying silver (typically reserved for gold due to its superior value-to-weight ratio) only makes economic sense when spreads are wide enough to cover expensive transport plus tariff risk. That this arbitrage exists at all demonstrates severe market dysfunction.
Silver Flashes Rare Warning Signal as Physical Market Seizes Up – BofA Targets $65
