Silver Traders Rush Bars to London as Historic Squeeze Rocks Market

Core Insights - The London silver market is experiencing a significant short squeeze, pushing prices above $50 an ounce for only the second time in history, reminiscent of the Hunt brothers' attempt to corner the market in 1980 [7][4][12] Market Dynamics - A sudden increase in demand from India, coupled with dwindling supply and concerns over potential US tariffs, has contributed to the current market turmoil [1][10] - The surge in prices is largely driven by rising investment in precious metals due to fears of increasing debt levels and currency devaluation in the West, exacerbated by the US government budget standoff [2] Supply and Demand - Silver inventories in London have decreased by one-third since mid-2021, primarily due to persistent deficits in mine production and a rush to ship metal to the US [8][9] - The "free float" of silver available in the London market has dropped to 200 million ounces, a 75% decline from over 850 million ounces in mid-2019 [9] Price Movements - Benchmark prices in London have surged, with spot prices reaching a premium of $3 over New York futures, a level not seen since the Hunt brothers' squeeze [12][11] - The cost to borrow silver in London has skyrocketed, exceeding 100% on an annualized basis, indicating extreme market stress [12] Market Liquidity - Liquidity in the silver market has nearly dried up, leading to significant borrowing costs for traders unable to source metal [6][4] - Bid-ask spreads for silver have widened dramatically, reflecting the illiquidity in the market [13] Logistics and Transportation - Traders are resorting to booking cargo space on transatlantic flights for silver bars, a costly method typically reserved for gold, to capitalize on the high premiums in London [5] - There are efforts to move silver from New York to London, with estimates of 15 million to 30 million ounces being sought for transport [15] Future Outlook - The resolution of the squeeze may depend on increased silver availability in London, either through sales from ETFs or other holders, or by transporting silver from other regions [14][17] - Concerns remain regarding potential US tariffs on silver, which could further impact market dynamics [18]