Prices Soar

Silver prices reached a record high of $53 per ounce on Tuesday, surpassing the previous record set in 1980.

Context

Silver's previous record of $48.70 per ounce was set in 1980 during the Hunt brothers scandal, when three Texas brothers attempted to corner the market by stockpiling silver worldwide. 

The current rally has accelerated as investors have sought safe-haven assets amid geopolitical tensions, inflation fears, and concerns about the decline of the dollar. It picked up further this week because of a liquidity squeeze in London – a shortage of tradable silver assets. Silver inventories in London have dropped by a third since 2021 and demand has outpaced mining production for four straight years, furthering the market’s squeeze. Gold set its own record of above $4,000 per ounce last week, driving some investors to silver as a more affordable precious metal.

Supply Crisis

Silver’s Tuesday high reflected a larger 85% rally this year that outpaced gold’s 59% YTD gain, driven by a severe supply shortage in London, the center of global precious metals trading. 

Inventories in London have dropped to historic lows, creating a premium of $1 to $2 per ounce compared to New York futures prices. The shortage has become so acute that traders have resorted to flying silver across the Atlantic in cargo planes from NY to London, a costly method typically reserved for gold shipments.

Multiple Demand Sources

Industrial demand from solar panel manufacturers and electronics producers has surged, with solar companies more than doubling their silver consumption over the past decade.

Indian buyers preparing for wedding season have added pressure to already tight supplies, as silver jewelry and coins are traditional wedding gifts and dowry items in India, one of the world's largest silver consumers. Investment demand has also increased as buyers seek alternatives to gold, which reached its own record of $4,179 per ounce on Tuesday.

Tariff Fears

The supply imbalance has been worsened by traders stockpiling silver in New York warehouses ahead of potential US import tariffs. The US government is considering adding silver to its Critical Minerals List, which would subject imports to tariffs.

The chief executive of Canada-based Wheaton Precious Metals said, “You can’t buy substantive physical volumes of silver, it's just not available.” Mine production peaked in 2017 and has remained limited because silver is typically produced as a byproduct of mining other metals.