Silver Squeeze 'Almost' Hits London as Gold Hits New Dollar High
Tuesday, 2/04/2025 15:59
GOLD BULLION in London and New York gold futures contracts both set new all-time highs in US Dollar terms on Tuesday, while silver spiked nearly $1 per ounce for the week so far in what one long-time market executive said could almost be called a "squeeze".
With the threat of US import tariffs hitting precious metals continuing to drive
heavy flows into New York warehouses since December, the lease rate of borrowing London gold for one month today rose towards 4.5% per annum, almost half-a-point above Monday's rate.
The 1-month cost of borrowing London silver more than doubled, meantime.
"6.5% for silver is almost at a level that could be called a squeeze," says Bruce Ikemizu, formerly of Chinese bank ICBC Standard's Tokyo branch and now head of the Japanese Bullion Market Association.
"I think there is a good possibility that the price of silver will jump in the future."
London silver bullion prices today leapt to $32.28 per Troy ounce as the Dollar weakened on the FX market, nearing December's highs and trading 7.6% above
the #silversqueeze peak of New Year 2021, when chatter on social media spurred a surge in short-term investment demand, before easing back.
New York's most active silver futures contract traded around $1 per ounce higher still, offering an incentive for banks, dealers and brokers to book deliveries from other countries, starting with the UK, to exploit this precious metal's "arb".
"Uncertainty over the US tariff situation has continued to drive flows of physical metal into the USA, and led traders to close out short positions on the CME – further driving demand for physical metal and leading to sharply higher physical premiums," says Jonathan Butler, head of business development and strategy at Japanese conglomerate Mitsubishi's precious metals division.
"Metal for immediate delivery has been so in demand that short-dated forward rates have moved into a rare backwardation, pushing lease rates higher."
Gold meanwhile missed a fresh record in most other currencies outside the US Dollar on Tuesday as global stock markets steadied after President Trump pressed ahead with 10% trade tariffs on China but "delayed" import duties on Mexico and Canada following concessions on border security from the Palacio Nacional and the PMO respectively.
"The United States' protectionism, isolationism and unilateralism will not bring it benefit," says an editorial in Beijing's state-controlled
China Daily.
Responding with 15% tariffs on US coal and LNG imports from next week, Beijing is also filing a case against Trump's "malicious" trade tariffs at the World Trade Organization as well as blocking exports to the US of key military-industrial metals including tungsten, tellurium and molybdenum.
Running at $202 billion in 2005,
the USA's trade deficit in goods with China peaked above $419bn in 2018 – back during Trump's first term in the White House – before easing towards $300bn in 2023 and last year.
With the Dollar today halving the past week's 1.5% surge in its trade-weighted DXY index, the price of London gold bullion jumped above $2840 per Troy ounce, its 4th new all-time high of 2025 so far.
Latest data meantime said that
job openings in the world's largest economy fell back in December towards September's 3.5-year low, while US factories received fewer new orders for a 2nd month running, knocking their value down to the least since June's 2-year low.
"Concerns over the inflationary impact of tariffs have kept gold well bid," says Butler at Mitsubishi, "[while] other haven assets such as US government bonds have also seen investors pile in, pushing down yields and helping non-yielding assets like gold look more attractive.
"The end of Chinese New Year [holidays] has also brought a missing degree of physical buying back to the market, although how much this will continue in an elevated price environment remains to be seen."
The gap between New York's most-active futures contract and the spot price of bullion in London today edged down to $25 per Troy ounce, almost $20 below last Thursday's level when the gap blew out from just $7/oz following a
front-page Financial Times' report on a "shortage" of gold in London's wholesale market.
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