#silversqueeze
Silver has been boosted this year by the so-called “debasement trade,” with investors flocking to the perceived safety of Bitcoin, gold and silver while pulling away from major currencies. Concerns that the value of financial securities will be eroded by inflation and unsustainable fiscal deficits has led those assets to set new milestones.
The debasement theme “has ignited investors’ enthusiasm towards gold and silver to the point where regression analysis gives way to something more akin to how investors view AI or the technology sector,” said Kieron Hodgson, commodity analyst at Peel Hunt.
The white metal is used around the world as an investment asset, but also has industrial applications including in solar panels and wind turbines, which collectively account for more than half of the silver sold. Demand is set to exceed supply for the fifth consecutive year in 2025.
Silver often moves in tandem with gold, sharing its strong negative correlation with the US dollar and Federal Reserve interest rates. But the metal is also notoriously volatile, and has a cult following among retail investors who view silver prices as being suppressed by large banks and institutions.
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That impassioned following has helped drive sharp rallies in silver in 2011 and 2020, when it surged 140 per cent in less than five months. Over the following year Redditors jumped on board, while #silversqueeze rapidly gained momentum on social media.
In 1980, it was the Hunt brothers, Texan oil billionaires and notorious speculators, whose fear of inflation and belief in the metal as a store of wealth prompted them to try to corner the global market. They stockpiled more than 200 million ounces, driving the price above $US50 an ounce before it crashed below $US11.
That makes silver one of only a small handful of markets whose record highs from the commodity spikes of the 1970s and 1980s have yet to be surpassed. In inflation-adjusted terms, silver’s new high is only worth approximately one quarter of its 1980 peak.
Bloomberg was unable to obtain intraday price data in the London spot market for that period, when the daily price auction settled at a record $US49.450 on January 18, 1980. The all-time-high on Comex was set on the same day, according to a spokesperson for the CME. The record on the Chicago Board of Trade contract, now defunct, was $US52.50.
Bloomberg
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