Silver prices have surged to their highest levels in decades, fuelled by a historic short squeeze in London. Spot silver climbed as much as 3.7 per cent, exceeding $US52 an ounce, while gold traded near $US4100, continuing its record-breaking rally of eight consecutive weekly gains. The surge has intensified a worldwide hunt for physical bullion to alleviate the growing mismatch between supply and demand.
At midday in New York, spot gold was up 2.2 per cent to $US4107.82, while silver traded on the Comex was 6.4 per cent higher at $US50.25. Platinum and palladium also experienced price jumps, indicating that the market stresses caused by surging investor demand are beginning to impact other precious metals.
Concerns about liquidity in London have pushed silver prices closer to the $US52.50-an-ounce record set in 1980. The unprecedented price difference between London and New York has led some traders to book cargo slots on transatlantic flights to transport silver bars, capitalising on the higher prices in London. This premium was approximately $US1.60 an ounce on Monday.
Silver lease rates, reflecting the annualised cost of borrowing metal in London, surged to over 30 per cent on a one-month basis on Friday. This created significant costs for those looking to roll over short positions. Tightening lease rates for gold and palladium further signal a widening strain on London’s bullion reserves. Goldman Sachs analysts noted that the silver market’s smaller size compared to gold’s amplifies price movements, warning of potential disproportionate corrections if investment flows pull back.
