Silver Price Signal Points to Tight Lending Conditions

Silver's price has been relatively stable around $66 in recent days, after a strong August. However, beneath this calm surface, an unusual market signal is emerging.

Karel Mercx, an analyst, points out that the spread between silver swap rates and interest rates is becoming increasingly negative. This, he argues, indicates tight conditions in the silver lending market, with fewer participants willing to lend silver for a year at higher compensation rates.

The chart tracking this spread shows it has fallen from -1.3 percentage points in early August to around -2 percentage points in early September. Mercx sees this as evidence of unusually expensive borrowing conditions for physical silver.

This analysis is supported by Fthegurus, who views the recent decline in silver price to $65 as a healthy pullback after its strong August performance. The analyst expects buyers to continue appearing around $65 and believes that if support at this level holds, it could lead to a gradual recovery towards $70 and eventually above.