Silver jumps to record high on supply tightness, rate-cut hopes

[SINGAPORE] Silver jumped more than 2 per cent to a record high, supported by ongoing supply tightness and rising expectations for an interest-rate cut in the US this month. Gold was steady.

The white metal traded as high as US$57.86 an ounce, rising for a sixth consecutive day and building on a 6 per cent gain in the previous session. Silver has more than doubled in value this year, with its most recent surge reinforced by limitations in physical supply.

Despite a record amount of metal flowing into London to ease a historic squeeze in the world’s biggest silver trading hub in October, the cost of borrowing the metal over one-month remains elevated. Other centres are now under pressure, with inventories in warehouses linked to the Shanghai Futures Exchange recently hitting their lowest in nearly a decade, bourse data shows.

Silver’s record-breaking surge “looks increasingly driven by speculative flow”, said Ahmad Assiri, an analyst from Pepperstone Group in Melbourne “What I am seeing now is a market where strong investor inflows meet limited physical supply, creating a price dynamic that can accelerate quickly,” he said.

Precious metals have also been boosted by increased expectations that the Federal Reserve will cut interest rates in December. Markets are fully pricing in a quarter-point rate cut on continued weakness in the American labour market and a series of dovish comments by Fed officials. The release of economic data delayed by the US government’s six-week shutdown has also supported the case for lower borrowing costs, which typically benefit non-yielding precious metals.

Silver miners advanced on Monday. In Australia, Sun Silver was up 20 per cent and Silver Mines 12 per cent, while Hong Kong-listed China Silver Group gained 14 per cent.

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The market was also recovering after an hours-long trading disruption on the Chicago Mercantile Exchange on Friday. With futures and options contracts on the Comex affected by the data-centre fault, some traders said they had reverted to calling brokers and dealers by phone to hedge their exposures.

Silver rose 1.9 per cent to US$57.5860 an ounce as at 10.25 am Singapore time. Gold was up 0.1 per cent at US$4,244.73. The Bloomberg Dollar Spot Index was down 0.1 per cent, while palladium and platinum each gained more than 3 per cent. BLOOMBERG