Silver Holds Near Record as London Squeeze Spurs Market Turmoil

(Bloomberg) -- Silver held near an all-time high, as a historic short squeeze in London added to momentum fueled by surging demand for safe-haven assets.

Spot prices for silver hit a record $53.55 an ounce in London, before edging lower. That was about $1 higher than a peak set in January 1980 on a now-defunct contract overseen by the Chicago Board of Trade, when the billionaire Hunt brothers attempted to corner the market. Gold also climbed to another record high, building on eight straight weeks of advances.

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Concerns about a lack of liquidity in London have sparked a worldwide hunt for silver, with benchmark prices soaring to near-unprecedented levels over New York. That’s prompting some traders to book cargo slots on transatlantic flights for silver bars — an expensive mode of transport typically reserved for gold — to profit off higher prices in London. The premium was at about $1.6 an ounce in early trading on Tuesday — down from a spread of $3 last week.

Silver lease rates — which represent the annualized cost of borrowing metal in the London market — have been persistently high this year, but surged to more than 30% on a one-month basis on Friday. That’s creating eye-watering costs for those looking to roll over short positions.

“What we are seeing in something like silver is just a mismatch maybe with some of the paper contracts relative to the physical positioning,” Evy Hambro, Blackrock Thematic and Sector Investing Global Head, told Bloomberg TV on Tuesday.

A jump in demand from India in recent weeks has drawn down the supply of available bars to trade in London. That followed a rush to ship silver to New York earlier this year as concern that the metal could be hit with US tariffs sparked large dislocations between the two trading hubs.

While precious metals were officially exempt from levies in April, traders remain on edge ahead of the conclusion of the US administration’s so-called Section 232 probe into critical minerals — which includes silver, as well as platinum and palladium. The investigation has revived fears the metals could be swept up in new tariffs, exacerbating market tightness.

At the same time, Goldman Sachs Group Inc. analysts warned of the potential for a price correction in a relatively illiquid silver market that’s a ninth the size of gold.

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“Without a central bank bid to anchor silver prices, even a temporary pullback in investment flows could trigger a disproportionate correction, as it would also unwind the London tightness that drove much of the recent rally,” the Goldman analysts wrote in a note.

The four main precious metals have surged between 57% and 84% this year, in a rally that’s dominated commodity markets. Gold’s advance has been underpinned by central-bank buying, rising holdings in exchange-traded funds, and rate cuts by the US Federal Reserve.

Demand for havens has also been aided by recurrent US-China trade tensions, threats to the Fed’s independence, and a US government shutdown.

“There seems to be no good reason to fight the trends in both gold and silver,” said Shyam Devani, an investor in Singapore. “It has become clearer the trends have accelerated, and are likely to continue because the underlying issues of weak governments, poor budgetary positions, confusion on monetary policies all conspire to push up both gold and silver higher.”

On Monday, analysts at Bank of America Corp. hiked their end-of-2026 price target for silver from around $44 an ounce to $65, citing persistent market deficits, elevated fiscal gaps and lower interest rates.

Spot gold traded 0.8% higher at $4,141.40 an ounce at 9:54 a.m. in London, after touching an all time high at $4,179.70 earlier in the session. The Bloomberg Dollar Spot Index rose 0.2%, extending last week’s gains. Silver edged lower, while platinum and palladium advanced.

Explainer: Why Silver Has Been Surging Even More Than Gold

--With assistance from S'thembile Cele.

(An earlier version of this story corrected the time in the last paragraph.)

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