Silver Market Supply Crisis: Prices at Record Levels

Historical Short Position Squeeze in the Silver Market

The London silver market is going through a period reminiscent of the famous speculation attempt made by the Billionaire Hunt brothers in 1980. For the second time in history, spot silver prices have surpassed $50 per ounce, facing a significant short position squeeze.

Prices Rise in London

The reference prices in London have surged to nearly unprecedented levels compared to New York, and market participants are facing liquidity issues. Under these conditions, investors in short positions are reportedly struggling to find metal.

Short Position Squeeze and High Borrowing Costs

Due to the squeeze, investors are forced to pay very high borrowing costs to delay their positions. Some players are engaged in fierce competition to transport large silver bars using expensive transatlantic flights, which are typically reserved for gold, in order to take advantage of the high premiums in London.

London, the Center of Precious Metal Markets

For over a century, London has maintained its central position in precious metal markets. The gold and silver bars stored in several vaults throughout the city establish global reference prices managed by a small group of banks. At the end of each day’s position closures, secure trucks transport the bars between vaults to complete transactions.