(Bloomberg) — Silver surged towards all-time highs above $50 an ounce as a historic squeeze deepened in the London market.
Spot prices rose as much as 3.7% to more than $51 an ounce before paring some gains, extending the winning streak to a third day, while the cost of borrowing the precious metal for one month in London reached an annualized record of 35%. Gold and palladium also rose.
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Silver is up roughly 70% this year, far outpacing gold’s advance, as investors seek security in the face of fiscal uncertainties in the US, concerns about an overheating equities market and threats to the Federal Reserve’s independence.
Earlier this year, fears that the US could levy tariffs on silver spurred a surge of metal to New York, drawing down inventories in London and reducing the amount of metal available to borrow. Much of the silver in London is held in vaults backing exchange-traded funds, and not readily available to buy or borrow on the market.
The tightness in London has led a typical premium of a few cents for futures in New York to collapse into a discount of more than $2.50 an ounce below spot prices.
The scale of that dislocation may end up easing market tightness in London, as traders buy cheaper metal in the US and ship it to the UK to capture higher prices.
WATCH: ETFs and central banks are leading the gold rally, while a squeeze in the silver market is sending it even higher. Samantha Dart, Co-head of Global Commodities Research at Goldman Sachs, joins Scarlet Fu on “Bloomberg Markets” to discuss.Source: Bloomberg
But for now, the squeeze is driving prices closer to the $52.50-an-ounce record from 1980, set on a now-defunct contract on the Chicago Board of Trade exchange.
The 1980 record was set when the Hunt brothers, Texan oil billionaires and notorious speculators, tried to corner the global market over inflation fears. They stockpiled more than 200 million ounces, driving the price above $50 an ounce before it crashed to less than $11.
Spot silver rose 1.7% to $50.11 an ounce as of 4:24 p.m. New York time. Gold and palladium rose while platinum fell.
–With assistance from Sybilla Gross.
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