tl;dr
A historic short squeeze in London has pushed silver prices to a record $53.55 per ounce, driven by soaring lease rates and speculative buying. Investors are exploiting a $1.40-per-ounce premium via transatlantic flights, while analysts warn of volatility amid liquidity concerns.
**Historic Short Squeeze Drives Silver Prices to Record Heights in London**
A historic short squeeze in London has sent silver prices soaring to unprecedented levels, with the metal hitting an all-time high of $53.55 per ounce on Tuesday. The surge is fueled by a dramatic spike in the cost of borrowing silver, known as the silver lease rates, which skyrocketed over 30% on a one-month basis last week, according to Bloomberg. This sharp increase has made it prohibitively expensive for traders to roll over short positions, triggering a cascade of buying activity that has further fueled the rally.
A short squeeze occurs when investors who bet against an asset—by borrowing and selling it with the expectation of repurchasing it at a lower price—are forced to buy back the asset as its price rises. This creates a feedback loop, pushing prices even higher. In this case, the London market’s liquidity constraints have amplified the effect, as the silver lease rates’ rapid climb has left short sellers scrambling to cover their positions.
The price disparity between London and New York has also driven unusual strategies. Investors are capitalizing on a $1.40-per-ounce premium in London by booking cargo slots on transatlantic flights for silver bars—a costly and atypical method typically reserved for gold. This arbitrage activity underscores the intensity of the current market dynamics.
Bank of America analysts have taken note, raising their end-of-2026 price target for silver from $44 to $65 per ounce. They cite factors such as persistent supply deficits and declining interest rates as key drivers. The surge in silver’s value is part of a broader metals rally, with platinum and palladium also seeing gains. Investors are flocking to precious metals as safe-haven assets amid geopolitical tensions, including U.S.-China trade disputes, a U.S. government shutdown, and the Federal Reserve’s rate-cutting cycle.
As of the latest data, silver is trading near $52.85, just below its recent peak. However, the rally has not gone unchallenged. Goldman Sachs analysts have warned of a potential correction, highlighting the silver market’s relative fragility. “The silver market is less liquid and roughly nine times smaller than gold’s, amplifying price moves,” they noted. Without central bank support to stabilize prices, even a temporary pullback in investment flows could trigger a sharp decline, potentially unwinding the London market’s tightness that has driven the recent surge.
While the current momentum shows no signs of abating, the warning signs from Goldman Sachs suggest that the path ahead for silver remains volatile. As investors navigate this frenetic market, the interplay of supply dynamics, geopolitical risks, and liquidity constraints will continue to shape the metal’s trajectory. For now, silver’s historic climb in London remains a testament to the power of short-term market forces and the enduring appeal of precious metals in uncertain times.