Behind the cliff-like decline of peak silver lease rates: "Silver squeeze" ebbing, liquidity returning.

The cost of borrowing silver in London (i.e. silver leasing rate) has fallen significantly from record highs, indicating a significant recovery in liquidity in the silver trading market. This return of liquidity has alleviated the "silver squeeze" that occurred earlier this month, but the decrease in silver leasing rates may mean that the silver price, which recently hit an all-time high, will be on a soft downward trajectory at least in the short term. According to data compiled by institutions, the silver leasing rate - the annualized cost of borrowing silver in the London silver trading market - fell to 5.6% on Monday, down from a historical peak of 34.9% on October 9. As shown above, the decrease in silver leasing rates from historically high levels largely indicates that the tight liquidity conditions in the London silver market are significantly easing as liquidity returns to the silver market. Earlier this month, the lack of liquidity in the London silver market led to frantic buying of silver globally, with buyers driving the silver price to historic highs, breaking a 50-year high. During the period of record highs in silver prices, some commodity traders took unusual measures in London, booking cargo holds on cross-Atlantic flights for loading silver bars - a high-cost choice usually reserved for gold - to profit significantly from the price difference. This historic squeeze led the London Bullion Market Association to consider publishing silver inventory levels weekly, CEO Ruth Crowell stated. These CEOs also added that silver will be prioritized over gold in reporting inventory levels. Currently, inventory levels of the two precious metals in the London market are published monthly. More frequent updates will provide the market with early warning signals of possible future supply constraints. "The reason for prioritizing silver is because the global financial markets have recently focused on it," Crowell said at the Global Precious Metals Conference in Kyoto, Japan on Monday. "Involving gold requires the direct participation of the Bank of England, which could be a longer process." In London, spot silver prices fell by up to 1.7% on Monday, continuing their decline since hitting a historic high of $54.4796 per ounce on October 17. As of 3:13 pm Singapore time, the spot silver trading price was $48.26 per ounce, down 0.8%. The plunge in leasing rates from 34.9% (October 9) to 5.6% (October 27) directly indicates that the "London physical squeeze" is rapidly receding. The dissipation of the squeeze premium usually weakens the short-term upward momentum of silver, increasing profit-taking pressure, so some Wall Street analysts believe that a short-term silver pullback is inevitable, but this pullback may present a buying opportunity. The latest exchange and industry statistics show that the silver shortage in London has been alleviated by cross-border adhoc shipments (China and the US shipping silver to London), leading to a decline in spot premiums and borrowing costs. However, the global supply-demand gap has been continuous for the fifth year, with industrial demand (especially photovoltaic/electronic) remaining high, providing a "buffer zone" for prices at the bottom. After reaching a historic high in mid-October, the London spot price saw a rare significant retreat following the cooling of the squeeze, reflecting an overheated correction rather than a confirmed bullish trend for silver. In particular, recent reports of significant net inflows and periodic net outflows of silver ETFs indicate that investment funds are rebalancing rather than overwhelmingly exiting the market. Philippe Gijsels, Chief Strategy Officer at BNP Paribas Fortis, stated that his prior prediction of silver prices reaching $50 has already been realized, and he believes that its value could double from the current high, with silver possibly reaching $100. He explained, "Integer numbers often attract investors like magnets. Once the price enters the 'gravitational field' of big integers, we usually see a rapid rise in prices and a buying frenzy." However, he noted that there may be a pause in buying before prices soar again. "After such a huge rise, there is usually a pause period. We may see a brief but quite intense pullback, with prices staying stable for a long time, or it may be a combination of both. But in any case, technical overbought conditions must be eliminated."