PRECIOUS METALS IN THE EYE OF THE STORM / MACLEOD FINANCE

PMs in the eye of the storm

Alasdair Macleod

An uneasy silence has descended on gold and silver, but the forces that will drive them higher are mounting. 

Both metals are being rapidly drained from paper markets.

The monthly cycle of Comex contract expiry has come round again, an incentive for the shorts to mark prices down to make call options expire worthless, shake out week holders, and have a favourable end-month valuation for their positions. 

This morning in Europe gold was $4690, down $145 from last Friday’s close and silver at $74.85 was down $5.90. 

Comex volumes for this month in gold have been very low, while there was better volume in silver. 

This contrast is illustrated below:

Comex gold probably reflects speculators having difficulty assessing the impact and consequences of the Gulf war. 

This is confirmed by open interest being extremely low, the black line in the chart below:

The disinterest from traders is against a background of persistent US exports of gold, reflected in Comex warehouse stock levels:

Additionally, US gold mine output is not recorded in the Comex statistics, but is going predominantly to Switzerland for refining into Chinese standard bars to be sent on to guess where? 

The next chart from Forbes published on April 7 puts the accelerating gold drain even more graphically:

While we are looking at gold prices wondering if we should buy or sell, the Asians particularly the Chinese are draining all America’s physical liquidity leaving it an empty paper shell — rather like an abandoned wasps’ nest. 

That’s bad enough, but the situation in silver is even more stark. 

The chart below shows Comex open interest is still at 20-year lows:

One might say that this is hardly surprising given the shakeout in the price. 

And referring back to our second chart above showing Comex trading volumes, the heightened activity in silver can be put down to expiry of the active May contract. 

Indeed, with the lack of speculative challenges in both gold and silver don’t be surprised if there are further markdowns, particularly ahead of Monday which is the last trading day for May options.

The Bloomberg chart below caught the attention of many silver followers this week, showing how China has ramped up its silver imports. 

Note that it does not include China’s silver exports:

This is only part of the story. 

China is the second largest of silver producer after Mexico. 

Not only does she mine silver, but an estimated 70% of her output is a byproduct of imported and domestic non-ferrous ores. 

And over the decades, it is clear that China has accumulated substantial strategic reserves. 

However, in recent years she has been a major exporter of silver, even in quantities greater than her own output drawing down on her reserves, and in significantly greater quantities than her imports. 

This two-way trade resulting in net exports explains how the global supply deficit over the last six years has been met without the silver price rising materially.

That is, until 2025 when she suddenly ceased her exports. 

According to the World Bank’s WITS trade portal, there appears to have been a sudden stop from 3,000 to 4,000 tonne export supplies, catching western industrial users unawares. 

This led to a crisis in the London spot market last October, and the price spike to $120 on 29th January.

Returning to the Bloomberg chart above and using World Bank data, China’s imports in 2025 of 320.51 tonnes is the first positive net import figure, as is the 836 tonnes in the first three months of this year which is running at ten times last year’s imports.

So, why the change in export policy? 

One suspects that 2025’s exports were suspended due to the trade uncertainties of the new US administration (President Trump was sworn in on 20th January), followed by US tariffs revised sharply upwards on 2nd April. 

And from the beginning of 2026, it was clear that America and Israel were preparing to attack Iran, which they eventually did on 28th February.

A fundamental conflict between soaring industrial and consumer-investor demand has unfolded and been exacerbated by China now hoarding silver at an increasing pace, draining it out of western paper markets. 

The consequences for Comex inventories are clear:

Bearing in mind that Mexico next door is the largest silver producer by far, this decline in silver stocks is remarkable. 

Presumably, of the 836 tonnes imported by China in 2026 Q1 much of this would have come from Mexico, in which case what we see on Comex is the tip of a silver iceberg.

Truly, we appear to be in the eye of a precious metals storm.