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There is some confusion in the investment community about silver prices in China, which are different from those quoted in London or New York. This is neither unusual nor unique. The current misunderstanding is preventing investors from fully grasping important developments in the Chinese market.
As requested by Silvercorp, CPM Group is providing a thorough explanation of the nature of silver prices in China, and their divergences from London prices. Beginning in 2023 but accelerating this year, Chinese silver prices have been rising more sharply than prices in London and New York. This is due to strong demand from Chinese industrial users, jewelry and silverware buyers, and investors. This report lays out some of the explanations of what prices actually are used in physical transactions in China and why and how they differ from London prices. CPM intends to follow this Market Commentary with a more comprehensive report soon.
One of the first things to note is that price differentials between markets, especially two quite different markets that are 5,700 miles apart, is that there are more than one silver price in each of these markets. Metals prices, including silver, vary around the world, even across town, reflecting market differences.
Companies producing and selling silver in China typically use Chinese silver prices as benchmark. This is the same as in most other countries. Some large producers outside of China sell at the London daily price. Many others sell at ‘spot’ or forward prices set between them and the buyers, typically either smelters, refiners, or financial intermediaries such as bullion banks and trading companies. It should be no surprise then that the price in China regularly varies from the price of silver in London.
But it gets more complicated.
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This CPM Group Market Commentary was produced for Silvercorp, one of the premier silver mining companies in the world. We would like to thank Silvercorp for making this paid CPM Group research available free of charge.
Silvercorp sees silver and silver mining equities as excellent investments, and wants to help investors to invest in silver and silver mining shares based on rational, fact-based reasons and expectations.