(Bloomberg) — Silver hit the highest in decades as a historic short squeeze in London intensified, with a fresh surge in prices adding urgency to a worldwide hunt for bullion that could alleviate the mismatch between demand and supply.
Spot silver climbed as much as 3.9% above $52 an ounce, exceeding last week’s peak, while gold surged to a fresh record above $4,115, building on a record-breaking run of eight weekly gains. Platinum and palladium also jumped amid signs that market stresses caused by surging investor demand are starting to spread to other precious metals.
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Concerns about a lack of liquidity in London drove silver closer to a $52.50 record from 1980 — set on a now-defunct contract on the Chicago Board of Trade. Benchmark prices in London have soared to near-unprecedented levels over New York, 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 $1.40 an ounce on Monday.
Silver lease rates — which represent the annualized cost of borrowing metal in the London market — surged to more than 30% on a one-month basis on Friday, creating eye-watering costs for those looking to roll over short positions. Lease rates for gold and palladium also tightened, signaling a broadening pull on London’s bullion reserves, following a rush to ship metal to New York earlier this year.
The silver market “is less liquid and roughly nine times smaller than gold’s, amplifying price moves,” Goldman Sachs Group Inc analysts wrote in a note. “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 four main precious metals have surged between 55% and 82% 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 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.