A question I’m getting frequently: Why is the March CME silver EFP trading at a 60 cent contango while 3-month OTC London silver is bid at –3.5% (roughly a 7.3% implied lease rate)?

From a pure arbitrage standpoint, the setup looks attractive at first glance: Borrow the March EFP at 60 cents (i.e., buy spot London / sell March CME futures) → +4.23% yield. Lend 3-month silver OTC in London at, say, –3%. This creates an apparent $1.03 spread from spot to March.

But here’s the problem: You are short the March futures, and if tariffs are imposed at 10%, the EFP could theoretically widen to ~$5.80/oz, completely overwhelming the spread. Even if you choose a shorter tenor: for example, lending OTC for 2 months and then planning to ship metal to the CME, you are still exposed to the same risk: a tariff announcement at any point before delivery blows out the EFP and crushes the arbitrage.

This combination of tariff risk + sharply negative OTC lease rates has created the massive dislocation between March CME EFPs and London OTC silver. Market Tone & Why This Matters: Separately, it was notable to see London OTC silver tighten again today.

Based on SOFR and OTC bids, implied lease rates are now over 7% for 3–6 months, and around 6.75% for 1 year, highlighting how tight London liquidity has become.

This is fundamentally bullish. While several banks called for the silver rally to end a few weeks ago, I remained constructive and expected the market to build support in the $48–$50 area before attempting higher levels. It took roughly two weeks, and since then silver has made several new all-time highs, even printing a $58 handle, where we are trading today.

Bottom line: With ongoing geopolitical and economic uncertainty as well as the structural OTC tightness in OTC London Silver, I remain positively biased toward both gold and silver.”