Silver Shatters Records Amid Supply Concerns and Investor Demand
Silver prices have reached unprecedented heights, breaking through previous records set during October's dramatic market squeeze. The precious metal surged as much as 4.2 percent to approximately US$55.66 per ounce, establishing a new benchmark that exceeds the peak witnessed during last month's supply crunch in London.
Market Forces Driving the Rally
Several key factors are converging to propel silver's remarkable performance. Growing anticipation of a Federal Reserve interest-rate cut in December has created favorable conditions for precious metals. Simultaneously, significant inflows into bullion-backed exchange-traded funds indicate strong investor confidence in silver as an alternative asset.
The market has experienced notable volatility, with Friday's trading session characterized by erratic price movements and thin liquidity. This followed a chaotic hours-long halt to trading in futures on the CME's Comex Exchange, though most trading operations resumed by early morning United States time.
Supply Constraints Intensify Market Pressure
The recent price surge comes just over a month after a severe supply squeeze in London, the dominant silver trading hub. While the arrival of nearly 54 million troy ounces has provided some relief, the market remains markedly tight. The cost of borrowing silver over one month continues to hover above normal levels, indicating persistent supply concerns.
These supply pressures have now extended to other major markets, particularly in China. Recent data reveals that silver inventories in warehouses linked to the Shanghai Futures Exchange have plummeted to their lowest level since 2015, creating additional upward pressure on global prices.
Analyst Outlook and Future Projections
Commerzbank AG analysts emphasized the critical role of Chinese inventories in their recent assessment. "In the short term, a further price increase cannot be ruled out if registered silver inventories in China continue to decline," they noted in a research publication earlier Friday.
Traders are also monitoring potential tariff implications after silver was added to the United States Geological Survey list of critical minerals in November. This development has created hesitation among some traders concerned about potential premiums for U.S. silver, particularly as 75 million ounces have left the vaults of the Comex futures exchange in New York since early October.
Broader Market Context and Performance
Silver's impressive rally represents an almost 90 percent surge this year, as investors increasingly turn to alternative assets in what market participants are calling the "dabasement trade" - a wider retreat from government bonds and traditional currencies.
Fundamental supply and demand dynamics continue to support silver's strength. The market is positioned for its fifth consecutive annual supply deficit, highlighting the structural tightness that differentiates silver from other precious metals. Unlike gold, silver maintains substantial industrial demand, with critical applications in solar photovoltaics and electronics manufacturing.
As of 4:52 p.m. in London, spot silver maintained its strong performance, trading 4.1 percent higher at US$55.59 per ounce. Meanwhile, spot gold also advanced, rising 1.2 percent to US$4,207.68 per ounce, suggesting broader strength across the precious metals sector.
