Silver prices have soared amid a historical short squeeze in the London market, reaching levels not seen in decades. This surge in silver prices has intensified the global demand for bullion, highlighting a significant mismatch between supply and demand.
Silver Price Surge Details
Recently, spot silver surged by 3.1%, nearing $52 an ounce. This price exceeded last week’s high and brings silver closer to its 1980 record of $52.50 per ounce. Gold has also seen a substantial increase, exceeding $4,080 an ounce, marking eight consecutive weeks of growth. Both platinum and palladium have experienced similar price increases.
Market Dynamics
- Benchmark silver prices in London are approaching unprecedented levels compared to New York.
- Some traders are opting for the high-cost option of booking cargo for silver bars via transatlantic flights due to massive premiums in London.
- Silver lease rates have surged above 30% on a one-month basis, significantly impacting those maintaining short positions.
According to analysts from Goldman Sachs Group Inc, the silver market is less liquid and approximately nine times smaller than gold’s. This reduced liquidity can result in amplified price fluctuations. Additionally, the absence of a central bank to support silver prices enhances the risk of a sharp correction if investment flows temporarily decrease.
Broader Impact on Precious Metals
The four main precious metals—gold, silver, platinum, and palladium—have experienced price increases between 55% and 80% this year. This rally is primarily driven by factors such as central bank buying, rising investments in exchange-traded funds, and interest rate reductions by the Federal Reserve. Ongoing US-China trade tensions and a potential US government shutdown have also contributed to heightened demand for these safe-haven assets.
Geopolitical Considerations
Recent developments have heightened trade tensions between China and the US, complicating market dynamics. On Sunday, China urged the US to cease tariff threats and engage in negotiations. In contrast, President Trump has indicated a more conciliatory approach, following discussions about imposing a significant tariff on Chinese imports.
The uncertainty surrounding the US administration’s Section 232 probe into critical minerals—includes silver, platinum, and palladium—fuels market tightness. Fears of new tariffs on these metals could contribute to further supply constraints in London.
As of the latest trading session, spot silver is significantly up, solidifying its position in the market alongside gold, which rallies near a record price of $4,085.98. Both platinum and palladium also reported gains exceeding 3%.
