Silver traders rush to ship bars to London amid historic short squeeze

Silver traders rush to ship bars to London amid historic short squeeze

Silver prices surged to historic highs above $50 an ounce in the London market, driven by a deepening short squeeze that has left traders scrambling to source metal and pay exorbitant borrowing costs . The squeeze, which has been compared to the Hunt brothers' notorious market cornering attempt in 1980, has led to unprecedented market conditions, with spot prices trading at a premium to New York futures and borrowing costs reaching record highs.

The London silver market has been thrown into turmoil by a massive short squeeze, driving prices above $50 an ounce for only the second time in history and stirring memories of the billionaire Hunt brothers’ notorious attempt to corner the market in 1980 . Traders have been forced to pay crippling borrowing costs to roll their positions and some have even rushed to book slots in the cargo holds of transatlantic flights to profit off the massive premiums in London.

The squeeze has been exacerbated by a combination of factors, including a wave of investment into precious metals driven by fears of rising debt levels and currency devaluation, and a sudden increase in demand from India. The tightness in the London market has led to a significant reduction in the available silver stockpile, with inventories falling by a third since mid-2021 .

To ease the market tightness, traders are rushing to ship silver bars from other parts of the world to London. One logistics executive estimated that traders were currently seeking to move some 15 million to 30 million ounces of silver from New York to London . The surge in demand has led to a significant increase in the cost of borrowing silver in London, with overnight borrowing costs rising well over 100% on an annualized basis .

The London Bullion Market Association has acknowledged the tightness in the silver market and is actively monitoring the situation . While the squeeze is likely to be resolved by more silver becoming available in the London market, there are still concerns that import tariffs on silver could exacerbate the situation .