Silver surged toward an all-time high above $50 an ounce as a historic squeeze deepened in the London market.

Spot prices rose as much as 3.7% to above $51 an ounce before paring some gains, while one-month borrowing costs for the precious metal in London hit a year-to-date record of 35%. Gold and palladium also rose.

Silver is up more than 70% this year, far outpacing gold, as investors seek safety amid US fiscal uncertainty, concerns over an overheated equity market, and threats to the Federal Reserve's independence.

Earlier this year, concerns that the US could impose tariffs on silver sparked a surge in the metal to New York, which reduced London inventories and reduced the amount of metal available for borrowing. Most London silver is held in vaults backing exchange-traded funds (ETFs), and is not easily bought or borrowed on the market.

Tight supplies in London have caused the typical premium of a few cents for New York futures contracts to plummet to a discount of more than $2.50 per ounce below the spot price. The scale of the dislocation may ease the tightness in the London market, as traders buy cheaper metal in the US and ship it to the UK for higher prices.

For now, however, the pressure is pushing prices closer to the 1980 record of $52.50 per ounce, set under a now-defunct contract on the Chicago Board of Trade. That 1980 record was set when the Hunt brothers, Texas oil billionaires and notorious speculators, attempted to monopolize the global market due to inflation concerns. They hoarded more than 200 million ounces, pushing prices above $50 per ounce before falling below $11.

Spot silver prices rose 1.5% to $50.02 per ounce at 1:03 p.m. London time. Palladium jumped 2%, while gold gained slightly and platinum traded almost unchanged. (alg)

Source: Bloomberg