The silver market is on fire, and it's not just precious metal enthusiasts who are taking notice. The so-called 'silver squeeze' is intensifying, sending prices to unprecedented heights and drawing in an unexpected crowd: energy traders. But here's where it gets controversial: as silver and gold prices soar, some are questioning whether this is a sustainable rally or a speculative bubble waiting to burst. Let's dive into the details and explore why this shift in the metals market is turning heads—and potentially sparking debate.
On Wednesday, silver continued its remarkable ascent in London bullion trading, hitting yet another record high alongside gold. This surge comes as global stock markets rebounded to their highest levels in a week, adding an extra layer of intrigue to the financial landscape. The broader boom in both precious and base metal prices, coupled with heightened volatility, is now attracting significant interest from energy trading houses. Attendees at London's LME Metals Week report a noticeable influx of new players from the energy sector, eager to capitalize on these market movements.
Meanwhile, crude oil prices lingered near five-month lows, hovering around $62 per barrel for Brent. In contrast, copper futures on the CME rallied to $5 per pound, a record high achieved in anticipation of the Trump administration's 'Liberation Day' trade tariff announcements. However, this price remains 14.0% below July's peak in U.S. copper derivatives prices, as noted in a recent analysis (https://www.bullionvault.com/gold-news/gold-price-news/gold-silver-copper-nasdaq-tariffs-070920251).
Silver, however, stole the show by setting its fourth consecutive record benchmark price, fixing above $52.46 per Troy ounce at midday in London—the global epicenter for precious metal trading and storage. Gold wasn't far behind, peaking above $4200 per ounce and adding over $200 to its value for the week before easing slightly. Despite this dip, gold set a new record London benchmark price for the eighth time in just 11 October trading sessions.
And this is the part most people miss: the lease rates for these metals are telling a fascinating story. One-month lease rates for borrowing gold in London have been positive for two weeks, though they slipped from 0.6% to 0.3% annualized on Wednesday. Silver lease rates, however, have been on a wild ride, halving to 14.1% overnight before rebounding to 24.2%. These historically high rates underscore the tightness of the silver market (https://www.bullionvault.com/gold-news/gold-price-news/silver-50-record-squeeze-100920251).
The discount between London prices and New York silver futures also widened, with the December Comex silver contract trading $1 lower than wholesale bullion quotes—a 10-cent-per-ounce gap. Trading volumes in London bullion markets saw modest increases last week, according to the LBMA, with gold and silver volumes rising 0.9% and 2.1% respectively, even as prices jumped 2.3% and 6.6%. This follows the previous week's dramatic surge, where gold trading volumes spiked 24.4% and silver volumes rose 21.5% on price gains of 3.1% and 5.8%.
Platinum, on the other hand, remained relatively quiet, with London trading volumes down 13.9% last week and prices holding steady today within a $30 range around $1654 per Troy ounce. This marks a 12-year high reached just five sessions ago. Palladium trading also dipped last week, falling 4.0% after the previous week's 18.8% surge, though prices today climbed to a fresh two-year high of $1571.
In the world of ETFs, Aberdeen, the $490 billion asset management giant behind the USA's fifth-largest gold-backed ETF (NYSEArca: SGOL), is now shifting its focus. According to WealthDFM, the firm is 'looking beyond the recent surge in gold prices' to explore opportunities in other metals. Meanwhile, Saudi Aramco's trading division—part of the $1.6 trillion gas and oil behemoth—is reportedly hiring copper traders as part of a strategic push into metals markets. Bloomberg News highlights this move as part of a broader trend of energy giants entering the sector, citing insights from London's annual LME Week events.
But here's the bold question: Are energy traders bringing much-needed liquidity to the metals market, or are they fueling speculative excess? Fast Metals' Andrea Hotter, reporting from London Metals Week, quotes the CEO of Trafigura, a multinational commodities trader, who notes that energy traders are inherently more speculative (https://x.com/AndreaHotter/status/1977667136702362079). This influx of new players undoubtedly adds liquidity, but it also raises concerns about market stability. As the silver squeeze tightens and gold prices soar, the metals market is becoming a battleground of strategies and ideologies.
What do you think? Is the current rally in precious metals a golden opportunity, or are we on the brink of a speculative bubble? Share your thoughts in the comments—let's spark a conversation that could shape how we view this evolving market.
