Spot silver prices surged to their highest level in decades as surging demand for safe-haven assets exacerbated supply constraints in the London bullion market. The precious metal surged 2.3% past $50 an ounce on Thursday, its highest level since the Hunt Brothers' squeeze in the 1980s.

Silver continued a surge that has lifted prices more than 70% this year, outpacing gold's record-breaking rally. This is part of a growing search for safe-haven assets fueled by concerns about fiscal risks in the US, an overheated equity market, and threats to the independence of the Federal Reserve.

Meanwhile, a shortage of freely available silver in the primary London market has supported prices, while sharply increasing the cost of borrowing the metal. On New York's Comex futures exchange, silver remains trading below its all-time high of $50.35 per ounce, set in January 1980.

The metal has been driven by the so-called "dip trade," with investors flocking to Bitcoin, gold, and silver as safe havens while avoiding major currencies. Concerns that the value of financial securities will be eroded by inflation and unsustainable fiscal deficits have caused these assets to reach new highs.

The white metal is used worldwide as an investment asset, but it also has industrial applications, including solar panels and wind turbines, which collectively account for more than half of all silver sold. Demand is expected to exceed supply for the fifth consecutive year by 2025.

The London silver market has tightened to almost unprecedented levels, with borrowing costs for the metal skyrocketing. This year, concerns about US tariffs on silver have driven a surge in shipments of the precious metal to the US, reducing inventories in London and reducing the amount of material available for borrowing.

On Thursday, silver futures in New York traded well below the benchmark price in London—an unusual reversal from the typically positive price premium.

Silver often moves in tandem with gold, sharing a strong negative correlation with the US dollar and Federal Reserve interest rates. However, the precious metal is also notoriously volatile and has a rabid following among retail investors who believe silver prices are being held down by large banks and institutions.

This enthusiastic following helped fuel sharp silver price rallies in 2011 and 2020, when it surged 140% in less than five months. Over the following year, Reddit users jumped on the bandwagon, while #silversqueeze quickly gained momentum on social media. In 1980, the Hunt brothers, Texas oil billionaires and notorious speculators, whose fear of inflation and belief in the metal as a store of wealth drove them to attempt to monopolize the global market. They hoarded more than 200 million ounces, pushing the price above $50 an ounce before falling below $11.

That makes silver one of the few markets whose record highs from the commodities boom of the 1970s and 1980s have not been surpassed. In inflation-adjusted terms, silver's new high is only about a quarter of its 1980 peak.

Bloomberg was unable to obtain intraday price data on the London spot market for that period, when the daily auction price hit a record $49,450 on January 18, 1980. The all-time high on the Comex was set on the same day, according to a CME spokesperson. (alg)

Source: Bloomberg.com