Silver tops $50 as squeeze bites; lease rates surge

Silver hovered near $50 (C$70) an oz. on Friday after setting a record at $51.30 a day earlier in its first trip over the threshold since 1980, as haven flows collided with an unusually tight London bullion market.

The move, which caps a multi-month advance, puts silver among the year’s best-performing major commodities. The metal has gained about 70% year to date.

Investor demand tied to U.S. fiscal worries, expectations of lower interest rates and broader buying of hard assets is coinciding with a shortage of immediately available metal in London, traders say. Spot premiums over near-dated futures widened this week, with spot trading about $1 above the December contract – a rare bout of backwardation that underlines tight prompt supply, London based fund manager SP Angel said.

“Lease rates have exploded in an uber-tight physical market,” said SP Angel analyst John Meyer. “We’ve seen silver lease rates jump to more than 19% from about 5% in June and near 0% at the start of the year – compared with a normal level around –1%. Strong industrial demand and fresh interest in silver as a proxy for gold have lifted both prices and lease rates,” he said.

Structural deficit

Silver ran a four-year cumulative deficit of about 678 million oz. from 2021–24, SCP Research estimates, and analysts project another 117 million oz. shortfall this year. Supply is to remain constrained because most silver output is a by-product of other metals.

Exchange-visible inventories can mislead, SCP cautions in a report issued earlier this week. Of the roughly 1.24 billion oz. tallied at end-2024, about 600 million oz. sit in exchange-traded funds (ETFs) and about 500 million oz. function as minimum working inventory – leaving a comparatively small free float when buyers need prompt metal.

Physical silver ETF holdings have risen by about 132 million oz. since early February, amplifying price moves during the spot squeeze. A spot squeeze is when immediate demand for physical metal overwhelms promptly available supply, pushing spot prices (and lease rates) above near-dated futures – often into backwardation – as buyers pay up for delivery now.

Demand drivers

Silver’s dual identity – part monetary metal, part industrial input – is central to the rally’s persistence, analysts say. On the industrial side, demand from solar photovoltaic manufacturing and vehicle electrification continues to outstrip earlier expectations, pushing fabrication needs higher even as manufacturers thrift loadings. On the investment side, silver’s lower unit price and higher sensitivity to gold moves have attracted macro funds and retail buyers as gold has set repeated highs this year.

Market plumbing

Borrowing costs in London have swung higher alongside the lease-rate spike. Traders say concerns around possible United States trade policy and tariff shifts earlier this year prompted additional metal to be shipped into New York, further depleting non-ETF stocks in London and tightening the nearby market. The result: elevated lease rates, spot-over-futures premiums and sporadic difficulty sourcing specific bar types for prompt delivery.

Silver is notoriously volatile and sharp setbacks are common – especially once backwardation eases and borrowed metal recirculates. Even so, with lease rates elevated, spot still at a premium and structural deficits intact, analysts say pullbacks may attract buyers while physical tightness persists.

1980 vs today

The last time silver touched $50 was in January 1980 during the so-called Hunt brothers saga, in reference to the Texas oil heirs who had amassed large futures and physical positions with leverage. On March 27 of that year, after exchanges raised margins and briefly allowed only liquidation-only trading, prices collapsed in what was a largely speculative crash dubbed Silver Thursday”.

Demand in 2025 leans more on industrial demand and macro hedging. What’s more, in inflation-adjusted terms the latest highs remain well below the 1980 peak.

Willem Middelkoop, founder of the Commodity Discovery Fund, recently told The Miner a silver price break above $50 could be the setup the metals needs for a run at $100 per ounce.