Silver, copper prices touch record highs: Here we decode why
What's the story
Silver and copper prices have surged to new highs amid a chaotic trading session on CME Group's Chicago Mercantile Exchange. The volatility was driven by low Black Friday trading volumes in the US and a brief spike in dealer-to-seller spreads for gold, indicating an illiquid market. Despite these disruptions, futures on the London Metal Exchange continued their upward trend as most trading operations resumed early in the US morning.
Market conditions
Silver price surpasses October peak amid market tightness
Silver prices have jumped as much as 5.9% to $56.53 an ounce, surpassing an October peak during a historic squeeze in London's market. The surge is backed by expectations of a Federal Reserve interest-rate cut next month, inflows into bullion-backed exchange-traded funds (ETFs), and ongoing supply tightness. Copper prices have also surged due to supply shortfalls and optimistic price predictions.
Global impact
Silver's new high puts pressure on other hubs
Silver's latest high comes just over a month after a severe supply squeeze in London's dominant trading hub, which sent prices soaring above levels in Shanghai and New York. The arrival of nearly 54 million troy ounces has eased that squeeze but the market remains tight with borrowing costs for the metal over one month hovering above normal levels. This has put pressure on other hubs including China, where silver inventories recently hit their lowest level since 2015.
Demand dynamics
Silver's industrial demand and copper's market tightening
Silver has surged over 90% this year due to investors flocking to alternative assets amid a broader retreat from government bonds and currencies. The market is expected to see a fifth consecutive supply deficit this year, with industrial applications in solar cells and electronics driving demand. Meanwhile, copper prices have been supported by the rising expectations of further monetary easing by the Federal Reserve, which could boost growth and demand in the world's largest economy.