Spot silver prices reached their highest levels in over four decades, driven by a surge in demand for safe-haven assets amid ongoing economic uncertainties. On the evening of March 14, 2024, silver prices jumped as much as 4.8 percent, peaking at $51.235 per ounce. This marks the highest price for silver since the infamous market squeeze led by the Hunt brothers in 1980.
The remarkable increase in silver prices this year—over 70 percent—has outpaced even gold’s recent record-breaking rally. Investors are increasingly seeking refuge in precious metals due to concerns over fiscal risks in the United States, an overheating equities market, and threats to the independence of the Federal Reserve. As the rush to secure gold continues, silver is also gaining significant attention.
Supply Constraints Intensify Market Activity
The rise in silver prices is further compounded by a shortage of the metal in the London bullion market. This scarcity has driven borrowing costs for silver to the highest levels recorded since data became available in 2002. On March 14, borrowing costs soared to 11 percent, reflecting tight market conditions.
Concerns regarding potential US tariffs on silver have spurred a rush to transport the metal to New York, leading to a depletion of inventories in London. This decline in available silver for borrowing has intensified the market’s tightness. Much of the silver stored in London is currently held in vaults that back exchange-traded funds, rendering it unavailable for immediate trading or borrowing.
Daniel Ghali, a commodity strategist at TD Securities, has noted that the availability of silver in London’s market is critically low. He stated, “This is the culmination of what we dubbed ‘the #silversqueeze you can buy into.’ In our view, we see evidence that higher London prices will beget higher London liquidity, which is the antithesis for this move higher.”
Market Dynamics and Future Projections
The current situation suggests that the premium for silver in London may eventually ease as traders begin to source cheaper silver from the US and China. As they transport it back to the UK, they aim to capitalize on the higher prices currently observed in London.
The ongoing fluctuations in silver prices highlight the complex dynamics of the precious metals market, which is influenced by a combination of demand, supply constraints, and geopolitical concerns. As investors continue to navigate this landscape, the performance of silver will remain under close scrutiny in the coming months.
