Shanghai vs London: The Most Important Signal in Today’s Market

Authored by GoldFix 

If there is one development that governs current risk management and reveals what is occurring beneath the surface of precious metals markets, it is not price direction in isolation. It is behavior. Specifically, it is the behavior of regional price spreads and their convergence.

This is a market tell.

At present, U.S. spot gold is trading approximately $70 higher on the day, while Shanghai gold futures are lower by roughly $130. The two series are not aligned perfectly in time, and they are not intended to be. The objective is accuracy, not precision. The key observation is that these prices are converging.

The same dynamic is visible in silver. Shanghai silver futures are trading near $79, while U.S. silver is higher by approximately $4, around $76. The spread between Shanghai and Western silver prices reached as much as $9 and fluctuated between roughly $5 and $8 over the past 72 hours. That spread is now narrowing.

The narrowing of this spread carries two distinct implications.

Demand Is Now Broadcasting Externally

The first implication is structural and operates at the macro level.

Demand for silver and gold is no longer confined to domestic Chinese markets. It is now being transmitted outward into global pricing. In commodity markets, demand pulls price. Supply does not lead price discovery in the same way when demand is persistent and inelastic.

As a result, global prices are converging toward the level implied by Chinese demand, at least until that demand is satisfied. As precious metals flows, wealth accumulation, and industrial demand continue to shift eastward, pricing authority follows.

This is the projection of Chinese demand onto the global market.

In prior regimes, Western paper dominance pushed convergence downward. When supply control and spoofing behavior dominated, regional prices converged lower. Under a demand-driven regime, convergence occurs at higher levels.

This behavior is familiar to participants in energy markets and basis trading. It resembles a regional spread convergence or crack spread framework, where prices move toward the dominant demand center rather than the cheapest supply. In this case, the basis is converging at a higher global price.

This process has been visible over the past two years and has accelerated over the past several weeks.

PRECIOUS METALS — LAST 72 HOURS COVERAGE pic.twitter.com/7inDbcSREx

— VBL’s Ghost (@Sorenthek) December 30, 2025

What Convergence Now Signals About Supply

The second implication operates at the micro level.

The fact that convergence is occurring while attention on the market is elevated suggests that metal is being located. Supply is being sourced and mobilized. At first glance, this appears contradictory. If supply is being found, why are prices rising?

The answer lies in how the London bullion market has been functioning, particularly over the past year and more acutely in recent months.

The market has presented itself as open, quoting prices at one level while metal has cleared elsewhere at meaningfully higher prices. The persistence of wide regional spreads indicated that metal was not available in sufficient quantity to arbitrage those differences. The market was nominally open, but inventories were effectively constrained.

As long as no participant was willing or able to sell into the higher price, the spread remained artificially wide.

What is changing now is not that London is suddenly flush with metal, but that metal is becoming available somewhere in the system. As supply begins to satisfy demand at elevated regional prices, those prices ease. At the same time, as supply is restocked and acknowledged at the spot level, prices rise to reflect that reality.

The result is convergence through adjustment on both sides. Regional prices move toward one another at higher levels. For example, prices converge from the 70s and 80s toward the mid-70s, rather than from the 20s and 30s toward the low end.

This is a fundamentally different market environment.

Why the Spread Matters More Than the Price

When this process concludes, prices may decline. Observers will point to that decline as evidence that the move was unsustainable. That interpretation misses the point.

The significance of the current behavior is not the terminal price. It is the confirmation that the market has transitioned into a physical, demand-led regime. Paper price suppression is no longer sufficient to override sustained physical buying.

Price will continue to converge higher until demand is satisfied. That point may arrive because sufficient metal has been accumulated, because a systemic shock interrupts buying, or because a participant is forced to exit under pressure. Whatever the trigger, the underlying structure remains intact.

The resolution of individual dislocations does not invalidate the regime shift. It confirms it.

The most important signal in the market today is not the headline price. It is the narrowing of the spread.

PRECIOUS METALS — LAST 72 HOURS GLOBAL COVERAGE

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