The London silver market has erupted into chaos after a dramatic short squeeze sent prices soaring above $50 an ounce — only the second time in history that the precious metal has breached that threshold. Benchmark prices in London surged to near-unprecedented levels compared to New York, with traders describing a market paralyzed by vanishing liquidity and soaring borrowing costs. According to Bloomberg, the crisis has become so extreme that some traders are chartering cargo space on transatlantic flights to physically ship silver bars from the U.S. to London in hopes of cashing in on record price premiums.
The extraordinary squeeze has evoked memories of the infamous 1980 Hunt brothers saga, when two Texas billionaires tried to corner the global silver market. While there’s no evidence of such concentrated manipulation today, traders and analysts told Bloomberg that the scale of the current disruption is unlike anything seen in modern markets. “I have seen nothing like it ever. What we are seeing in silver is entirely unprecedented,” said Anant Jatia, chief investment officer at Greenland Investment Management.
London has long been the heart of the world’s precious metals trade, setting global benchmark prices through a small network of banks and vaults. But that system is now under strain as the supply of readily available silver dwindles. Bloomberg data shows that inventories in London have fallen by a third since mid-2021, with the pool of “free float” metal available for trade collapsing 75% from 2019 levels to around 200 million ounces. Much of the remaining stock is tied up in exchange-traded funds or long-term holdings, leaving the market dangerously thin.
The crisis has been intensified by a surge in physical demand — especially from India, which has sharply increased silver imports in recent weeks after shifting purchases away from Hong Kong during the Golden Week holiday. The sudden spike in Indian demand, combined with fears that the U.S. might impose tariffs on imported silver, has deepened the squeeze, Bloomberg reported.
As liquidity vanished, bid-ask spreads in London exploded from the usual three cents to more than 20 cents an ounce. Borrowing costs for London silver spiked to levels exceeding 100% on an annualized basis — a figure some traders say surpasses even the 1980 squeeze. “Banks don’t want to quote each other, so the quotes get extremely wide,” said Robert Gottlieb, a former JPMorgan Chase & Co. trader. “That’s creating this tremendous illiquidity.”
To relieve the pressure, traders are resorting to extraordinary measures. Logistics firms told Bloomberg they’ve fielded urgent calls from clients seeking to airlift between 15 million and 30 million ounces of silver from New York to London — a costly endeavor usually reserved for gold. On Friday, the Comex exchange saw its largest one-day silver withdrawal in over four years as supplies were rushed overseas. Others expect additional flows from China, where silver prices are trading at a rare discount to London, although volumes remain uncertain due to tight conditions there as well.
Market veterans say the situation could stabilize if ETF investors or major holders release silver back into circulation — or if elevated prices curb demand. “There’ll be a natural momentum for material to move back into London and hopefully things will normalize,” said Joseph Stefans, head of trading at MKS Pamp SA. Still, risks remain. Any delay in transport amid a U.S. government shutdown could worsen the crunch, while the threat of potential import tariffs looms large.
“The market is on a knife’s edge,” said Amy Gower, strategist at Morgan Stanley, in comments cited by Bloomberg. “If tariffs don’t materialize, that could relieve some of the tightness. But until then, high prices are the only thing holding this together.”
For now, the silver market’s unprecedented volatility is rewriting history — and reminding traders that even in the modern era of digital finance, the physical weight of metal can still move markets in spectacular fashion.
