USA Sends Silver Bars to London as Historic Squeeze Hits

The global silver market is facing an unprecedented crisis as a severe physical shortage in London forces U.S. silver bars to be flown across the Atlantic to stabilize supply. Benchmark silver prices have surged above $50 an ounce, marking only the second time in history that the precious metal has reached such levels, recalling the infamous 1980 Hunt brothers' squeeze.

According to Bloomberg, the London silver market is suffering near-total illiquidity. Traders short on physical silver are scrambling to secure metal, often paying extremely high borrowing costs to maintain their positions.

"There is no liquidity available currently. What we are seeing in silver is entirely unprecedented," said Anant Jatia, Chief Investment Officer at Greenland Investment Management.

London has been the global hub for precious metals trade for over a century, setting benchmark prices and circulating vaulted bars among a tight network of banks. Traditionally, secure trucks handled daily transfers of metal, but with the current shortage, cargo planes are now moving silver from New York to London, a transportation method normally reserved for gold.

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The squeeze stems from a combination of structural shortages and surging demand:

• Persistent investment demand amid Western debt concerns and fears of currency devaluation.

• Structural decline in London inventories: available silver has fallen from over 850 million ounces in 2019 to just 200 million ounces today-a 75% reduction.

• Spike in Indian purchases during Golden Week, shifting demand from Hong Kong to London.

• Potential U.S. tariffs on silver imports, adding uncertainty to global supply.

Even Indian exchange-traded funds are suspending new inflows. Kotak Mahindra Asset Management cited a shortage of physical silver in the domestic market, with premiums sharply above international benchmarks.

The London Bullion Market Association has acknowledged "tightness in the silver market" and confirmed that it is closely monitoring the situation.

• London spot premiums are now up to $3 per ounce above New York futures.

• Overnight borrowing costs exceed 100% annualized, likely surpassing levels seen during the 1980 Hunt brothers' squeeze.

• Bid-ask spreads have widened from a normal few cents to over 20 cents per ounce, as banks withdraw from quoting.

"Banks don't want to quote each other, so the quotes get extremely wide," said Robert Gottlieb, former JPMorgan trader.

Unlike 1980, when regulators restricted new positions to break the Hunt brothers' corner, today's market lacks a simple fix. Relief depends on physical supply injections, whether through ETF liquidations or shipments from abroad. U.S. silver shipments are already moving to London to cover the shortfall-a costly but necessary step to restore market balance.

Analysts warn that the current squeeze reflects genuine structural imbalances, not speculative manipulation, making this one of the most critical disruptions in the global silver market in decades.

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