The Silver Squeeze is tightening, and the price volatility of metals is attracting energy traders. But here's where it gets controversial: while the precious metal silver has been setting new record prices alongside gold, the surge in precious and base metal prices, as well as volatility, is drawing in new players from the energy trading world. Let's dive into the details and explore the implications of this trend.
The Silver Squeeze in London bullion trading continued on Wednesday, with silver reaching another fresh record price. This boom in precious and base metal prices, as well as volatility, is attracting new flows from energy trading houses, according to attendees of London's LME Metals Week. Crude oil prices, however, held near 5-month lows around $62 per barrel of Brent. Copper rallied to $5 per pound on CME futures contracts, a new record high, but 14.0% below July's spike in US copper derivatives prices.
Silver, in contrast, set its 4th new record benchmark price in a row, fixing above $52.46 per Troy ounce at midday in London, the world's central trading and storage hub for precious metals. Gold bullion peaked above $4200 per ounce, adding over $200 for the week so far, before easing back but setting a new record London benchmark price for the 8th day in 11 sessions so far in October.
One-month lease rates to borrow gold in London have now been positive for 2 weeks running, slipping from 0.6% to 0.3% annualized on Wednesday. Silver 1-month lease rates, meanwhile, halved to 14.1% overnight before rebounding to 24.2%, remaining historically high as silver market conditions stay tight. The discount to London prices in New York silver futures also widened, growing by 10 cents per ounce as the December Comex silver contract traded $1 lower than wholesale bullion quotes.
London bullion's total trading volumes in gold and silver rose only slightly last week, according to new data from the trade association the LBMA, up 0.9% and 2.1% respectively by ounces as prices jumped 2.3% and 6.6%. This follows the prior week's surge of 24.4% in gold trading and 21.5% in silver volumes on price gains of 3.1% and 5.8% respectively.
Platinum was quieter, with London volumes 13.9% lower last week and prices trading little changed today from Tuesday, albeit in a $30 range around $1654 per Troy ounce, a new 12-year high when reached 5 sessions ago. Palladium trading also dropped last week in London, down 4.0% from the prior week's 18.8% surge, but with prices today rising to a fresh 2-year high at $1571.
The $490bn asset management group Aberdeen, which has launched what is now the USA's 5th largest gold-backed ETF trust fund, is now 'looking beyond the recent surge in gold prices' to other metals, according to professional investors magazine WealthDFM. The trading division of $1.6 trillion gas and oil business Saudi Aramco plans to hire copper traders as part of a push into metals markets, joining a growing wave of energy giants moving into the sector, reported Bloomberg News from London's annual LME Week events yesterday.
'Energy traders are more speculative,' says Fast Metals' special correspondent Andrea Hotter, also reporting from London Metals Week and quoting the CEO of multinational industrial commodities traders Trafigura. 'Their entry to metals markets naturally brings more liquidity amid the recent trend of new energy player entrants into metals.'
So, what does this mean for the future of metals markets? The influx of energy traders could bring increased liquidity and volatility, but it also raises questions about the sustainability of the trend. Will the energy sector's interest in metals markets be a short-lived phenomenon, or will it lead to long-term changes in the dynamics of these markets? And what impact will this have on the price of metals and the broader economy? These are questions worth exploring further, and we invite you to share your thoughts in the comments below. Do you think the energy sector's interest in metals markets will be a game-changer, or is it just a passing trend?
