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Silver prices hit a record high on Tuesday as a scramble for the precious metal in London injected fresh momentum into a rally that has already outpaced that of gold.
Silver touched $53 per ounce in early trading, taking its gain for the year to more than 85 per cent.
The blistering rally has been driven both by appetite from investors, who see the white metal as a proxy for gold — whose price also hit a fresh high on Tuesday of $4,179 a troy ounce, taking its gains for the year to 59 per cent — and by demand from industries including electronics and solar panels. In recent weeks, Indian buyers preparing for the wedding season have also poured into the silver market.
With the level of available silver inventories in London approaching historic lows, a premium of between $1 and $2 has developed for silver in London, compared with the price of the metal on the Comex futures in New York.
Randy Smallwood, chief executive of Wheaton Precious Metals, said years of low supply, combined with growing demand from industry and investors, had led to a shortage.
“There is a serious squeeze on, and you can’t buy substantive physical volumes of silver, it’s just not available,” he said.
Nicky Shiels, analyst at MKS Pamp, said the “unprecedented tightness in silver . . . has left the linchpin of the physical market in London broken”.
As a result, some traders have taken the highly unusual step of flying silver across the Atlantic from New York to London in the cargo holds of planes — normally only gold travels this way, while bulkier silver usually travels by ship.
The current squeeze has sent prices even higher than they were in the famous Hunt brothers’ silver squeeze of 1980. Traders often describe silver as “gold on steroids” because its price tends to swing more sharply than that of the yellow metal in times of market stress.
Unlike gold, which is widely held by central banks, the silver market does not have a seller of last resort when faced with liquidity shortages.
US tariff fears have contributed to a build-up of physical silver in New York, as the market awaits a decision from Washington on whether to apply levies to silver imports — contributing to the squeeze in London.
“Physical silver is sitting locked up in the ‘wrong’ location,” said Shiels.
Silver production is limited because it is often mined as a byproduct of other ores, such as lead, zinc and gold.
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