Gold Prices Rise to $4,129 per Ounce

SadaNews - Silver prices have reached a new record level above $52.50 per ounce, strengthened by a "historical short squeeze" in London, which added momentum to a rising trend fueled by increased demand for safe assets.

Spot prices rose by 0.4% to reach $52.5868 per ounce in London, surpassing a peak recorded in January 1980 on a contract that was later canceled by the Chicago Board of Trade when the Hunt brothers attempted to corner the market. Gold also rose to a new record level, continuing its rise for the eighth consecutive week.

Liquidity Crisis in London Drives Air Shipment of Silver

Concerns over a liquidity shortage in London have sparked a global search for silver, with reference prices soaring to nearly unprecedented levels compared to New York.

This has led some traders to book shipping spots on transatlantic flights to transport silver bars, a costly method typically reserved for gold, to take advantage of higher prices in London. The price premium reached about $1.55 per ounce at the start of trading on Tuesday, down from a gap of $3 last week.

Silver leasing rates, representing the annual cost of borrowing the metal in the London market, surged to over 30% month-over-month on Friday, after remaining elevated throughout the year. This has resulted in hefty costs for those seeking to renew short positions.

The increase in demand from India in recent weeks has drained supplies of tradable bars in London, following a surge in shipments to New York earlier this year amid fears that silver could be included on a list of goods that may face U.S. tariffs, causing widespread disruptions among the main trading centers.

U.S. Investigation Revives Concerns About Tariffs

Despite precious metals being officially exempted from tariffs in April, traders remain uneasy ahead of the publication of the results of a U.S. government investigation under Section 232 concerning "critical minerals," which includes silver along with platinum and palladium. The investigation has revived fears that new tariffs could be imposed on these metals, potentially exacerbating market tightness.

Analysts at Goldman Sachs Group wrote in a note that the silver market "is less liquid and about one-tenth the size of the gold market, which amplifies price movements." They added, "In the absence of demand from central banks stabilizing silver prices, even a temporary decline in investment flows could lead to a sharp correction, as it would loosen the tightness in London that has driven most of the recent rally."

Precious Metals Continue Historic Rise

The four main precious metals have surged between 56% and 81% since the beginning of the year, in a rally that has dominated commodity markets.

Gold's rise has been supported by purchases from central banks, increased holdings of exchange-traded funds, and interest rate cuts from the Federal Reserve. Ongoing tensions between the U.S. and China, threats to the Federal Reserve's independence, and the U.S. government shutdown have also bolstered demand for safe havens.

Factors Supporting Prices

Analysts at Bank of America raised their year-end price target for silver for 2026 from about $44 per ounce to $65, citing ongoing market deficits, widening financial imbalances, and declining interest rates.

Meanwhile, investors are assessing the Federal Reserve's monetary easing path ahead of its upcoming interest rate meeting later this month.

On Monday, Philadelphia Fed President Anna Paulson indicated she supports further cuts of a quarter percentage point twice this year, stating that monetary policy should ignore the impact of tariffs on rising consumer prices. Lower borrowing costs would support non-yielding precious metals.

Spot gold rose by 0.5% to $4,129.80 per ounce at 7:38 a.m. in Singapore, after jumping 2.3% on Monday. The Bloomberg Dollar Index remained unchanged after rising about 1% last week, while silver rose 0.3%, and platinum and palladium surged.