Silver price climbs to fresh high on supply fears

Ben Graham · Dezembro 1

Silver continued to gain momentum by setting another record high on Monday, as traders upped their bets on the precious metal amid supply tightness.

On Friday, the metal had already risen by nearly 6% to a record after an hours-long trading disruption on the CME, the world’s largest futures exchange.

That run resumed on Monday, with spot silver jumping to a new peak of $58.81 per ounce, surpassing last Friday’s record by another 3.6%. Over the past week, it has gained more than 12%.

The rally serves as a continuation of supply pressures faced by global centers following last month’s historic squeeze in London. Latest data reveals that silver inventories in warehouses linked to the Shanghai Futures Exchange recently hit the lowest in nearly a decade.

“Shortages in the global market as a result of the recent squeeze in London are still being felt,” said Daniel Hynes, a commodity strategist from ANZ Group Holdings Ltd. “With gold taking a breather, it appears investors have turned their attention to silver.”

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Silver outperforms gold

With Monday’s move, silver has now risen for six straight sessions and is on pace to double in value this year. Gold, meanwhile, trails behind with a year-to-date gain of 59% after easing off its record set in October.

“The move last week has been speculatively driven, with accelerating upside momentum attracting more and more fast money,” David Wilson, director of commodities strategy at BNP Paribas, told Bloomberg.

The “key to watch is the fact that the gold-silver ratio has gotten down close to 70,” he said, adding that investors will be watching how expensive silver is getting relative to gold.

Increased bets on silver

According to Bloomberg data, the spread between the cost of call and put options on silver futures leaped to the highest since 2022 in recent days, indicating a surge in the cost of capitalizing on price spikes.

Also supporting prices in recent sessions are increased expectations that the US Federal Reserve will cut interest rates this month, which would bode well for safe-haven assets like gold, and by extension, silver.

Markets are fully pricing in a quarter-point rate cut on continued weakness in the American labor market and a crescendo of dovish comments by Fed officials over the last week.

The release of economic data delayed by the US government’s longest shutdown in history has also supported the case for lower borrowing costs, which typically benefit non-yielding precious metals.

Meanwhile, traders continue to monitor any potential tariff on silver after the metal was included in the updated list of US critical minerals. Fear of a sudden US premium has made some traders hesitant about sending the metal out of the country, offering little prospect of relief should the market tighten further.

(With files from Bloomberg)

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