Silver is breaking records. The price of the metal will not stay at the highs for long, analysts say

Only this year, on October 10, it broke its previous historical record, already well "bearded", from January 18, 1980, when it closed at the price of 49.45 dollars per ounce. This closing price, which is over 45 years old and adjusted for inflation, is still a record price in real terms, at around USD 206.5 per ounce. The current nominal price of silver is thus still roughly 3.6 times lower in real terms than its closing price on 18 January 1980.

In early 1980, however, the price of silver was pushed to a record high by several months of speculation by the Hunt brothers of the USA, who bought up a third of the global silver reserves held by investors, but excluding governments, on massive debt.

The price of around $58 an ounce of silver is roughly half what the precious metal was worth a year ago. However, there are speculations in the market that the current price of silver is unsustainable.

The situation of 1980, when literally a few individuals manipulated the entire silver market, is not possible today, even with more advanced regulation. And, leaving aside the situation at the turn of the 1970s and 1980s, the current price of silver is extreme. The tendency to return to more normal price levels may soon prove strong enough to trigger a noticeable correction in the silver price.

The extreme price of silver is evidenced by the fact that it is now the most expensive in gold terms for the entire period since the beginning of August 2021, yet this year gold is also breaking historical record after historical record. At Monday's close of the exchanges, just under 73 ounces of silver could be had for an ounce of gold. That's the least since Aug. 6, 2021, according to data compiled by Bloomberg.

The price of silver is not immediately driven up by massive speculation or even market manipulation. It's mainly low inventories of the metal at key storage sites around the world. This year's high demand for gold is also driving demand for silver as an alternative. This has been motivated by geopolitical tensions, central bank purchases led by China's, which is seeking to reduce its hold on the dollar, or the prospect of interest rate cuts, particularly by the US Federal Reserve.

The fear of the introduction of new tariffs on silver imports by the US has led to an increase in silver exports to America in the first half of this year. The London silver market has thus found itself in a distressed situation with regard to the stocks of the precious metal at its disposal, so it has increased its imports of silver for a change from, for example, the Shanghai Futures Exchange or its associated warehouses.

Those storage facilities now hold the least amount of silver since 2015, after China exported 660 tonnes of the silvery metal, the most in history, to London this October. Falling stockpiles are stirring near-panic among traders, resulting in the price of silver rising to a new record.

However, industrial demand for silver is also strong, especially again in China. Silver is used in the manufacture of photovoltaic components, with the last quarter traditionally being the seasonal peak for solar panel installations.

In addition, at the beginning of November, President Donald Trump's administration placed silver on the list of critically important minerals, along with, for example, copper and uranium. This means that the likelihood of tariffs or restrictions on silver trade is increasing.

The US administration argues that there is a need to get rid of over-dependence on imports of critical raw materials, which, in its view, threatens US security, the development of local infrastructure and technological innovation. Donald Trump himself would like to increase domestic production of critical raw materials.

Text originally published on lukaskovanda.cz.