London’s silver market erupted this business week after an extraordinary short squeeze blasted prices past $50 an ounce for only the second time in history, reviving comparisons to the historic 1980 Hunt brothers fiasco that once rocked global commodities.
The rally has driven benchmark prices in London to levels not seen in decades, eclipsing New York’s, and throwing the entire market into turmoil.
Traders said liquidity has almost disappeared, leaving anyone short on silver scrambling to find metal and paying sky-high borrowing costs to roll positions forward.
The panic has gotten so bad that some traders have begun booking space in transatlantic cargo planes to physically ship silver bars from New York to London, a method usually reserved for gold. They’re doing it simply to cash in on the record-high premiums now offered in London.
Analysts stress there’s no single Hunt-style player trying to corner the market this time, and that instead, they point to a perfect storm of factors (surging investor demand, shrinking inventories, and growing fears over U.S. tariffs) that together have pushed prices into overdrive.
Traders rush for cover as liquidity vanishes
“This is completely unprecedented,” said Anant Jatia, chief investment officer at Greenland Investment Management. “There is no liquidity available currently.”
For over a century, London has served as the command center of global precious-metal trading, where a handful of banks set daily benchmark prices for both gold and silver. Each evening, after trades are squared, trucks move bullion between heavily guarded vaults across the city. That system now stands under severe strain.
The spike in silver prices has been fueled partly by a flood of capital into gold and silver as investors hedge against ballooning Western debt and currency devaluation, both worsened by the U.S. government shutdown and budget deadlock.
Yet traders say the real crunch stems from a dramatic rise in Indian demand over recent weeks, coupled with a tightening supply of tradable bars and fears that Donald Trump’s administration might slap tariffs on the metal under a critical-minerals probe.
Daniel Ghali of TD Securities said Indian buyers who once sourced silver from Hong Kong shifted orders to London during the Golden Week holiday, draining local availability. One Indian ETF even froze new inflows on Thursday, citing a domestic shortage.
London’s supply problem runs deeper. Vault inventories have been eroding for years. Since mid-2021, they’ve fallen by roughly one-third, leaving only about 200 million ounces freely available — down 75% from over 850 million ounces in 2019, data compiled by Bloomberg shows.
Most of what remains sits locked inside exchange-traded funds, out of reach for physical traders. The London Bullion Market Association (LBMA) acknowledged it was “aware of tightness in the silver market and is actively monitoring the situation.”
Prices break records as silver flies across oceans
The London silver auction, running since 1897, traded above $50 on Friday for the first time ever. Spot prices in London soared to premiums of $3 per ounce over New York futures, a spread not witnessed since the 1980 squeeze. The cost to borrow London silver overnight jumped past 100% annualized, and market veterans say it might even surpass the 1980s peak.
Bid-ask spreads widened from a normal 3 cents to more than 20 cents per ounce, evidence of how thin trading has become. “Banks don’t want to quote each other, so the quotes get extremely wide,” said Robert Gottlieb, former precious-metals trader and managing director at JPMorgan Chase & Co.
Back in 1980, the Hunt brothers’ corner collapsed when U.S. exchanges stepped in. Comex and the Chicago Board of Trade froze new speculative positions, forcing traders to liquidate and sending prices tumbling from a record $52.50 an ounce on January 21, 1980.
This time, no regulator can pull the same lever. The only way out is for more metal to reach London — either through ETF holders selling or through shipments flown from abroad.
Early signs show some deliveries are underway, but complications persist. Traders in New York hesitate to export because delays could mean losing millions overnight. The U.S. shutdown threatens to slow customs clearance, while even a day’s lag in this tight market can erase profits.
Adding to the anxiety are fears that Trump could soon impose import tariffs on silver under Section 232, a federal investigation covering key minerals. Until those questions are clear, London’s market remains in gridlock.
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Source: https://www.cryptopolitan.com/silver-surges-past-50-hunt-brothers-saga/
