Surge to decades high amid supply squeeze in London bullion market
#silversqueeze
Silver has been buoyed this year by what’s been called the “adulteration trade” as investors flock to the perceived safety of Bitcoin, gold and silver while moving away from major currencies. Concerns that the value of financial securities will be eroded by inflation and unsustainable fiscal deficits have led these assets to set new milestones.
The adulteration theme “has sparked investor interest in gold and silver to the point where regression analysis has been replaced by something more akin to the way investors view the artificial intelligence or technology sector,” said Peel Hunt commodities analyst Kieron Hodgson.
The white metal is used as an investment asset around the world, but it also has industrial applications such as solar panels and wind turbines, accounting for more than half of silver sold. Demand is expected to exceed supply for the fifth consecutive year in 2025.
Silver often moves in tandem with gold and shares its strong negative correlation with the US dollar and Federal Reserve interest rates. But the metal is also known to be volatile and has a following among retail investors who think silver prices are being suppressed by big banks and institutions.
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This passionate pursuit helped fuel sharp rallies in 2011 and 2020, when silver surged 140 percent in less than five months. The following year, Reddit users also joined the campaign, and #silversqueeze quickly gained momentum on social media.
There were the Hunt brothers in 1980Fear of inflation and their belief that the metal is a storehouse of wealth have led Texas oil billionaires and notorious speculators to corner the global market. They stockpiled more than 200 million ounces and pushed the price to over $50 an ounce before falling below $11.
This makes silver one of the few markets that have reached record highs since the commodity booms of the 1970s and 1980s and have yet to be surpassed. In inflation-adjusted terms, silver’s new peak is worth only about a quarter of its 1980 peak.
Bloomberg was unable to obtain intraday price data in the London spot market on January 18, 1980, when the daily price auction reached US$49,450. According to a CME spokesperson, the all-time high on the Comex was set on the same day. The record in the now-defunct Chicago Board of Trade contract was $52.50.
Bloomberg
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