Why Are Silver Traders Rushing Bars to London in a Historic Short Squeeze?
Global silver markets have been hit by an intense short squeeze that is forcing rapid physical deliveries to London, the world’s largest precious-metals hub. The scramble to move bars — often under tight time frames and elevated logistics costs — is changing the mechanics of how physical settlement, borrow rates and hedging function across exchanges.
Market participants tracking the episode can compare tactical approaches using our Nifty Option Tip to assess volatility-linked positioning in broader portfolios.
What triggered the squeeze
Concentrated short positions in certain futures and large open interest near expiry combined with an unexpectedly high number of delivery notices created a classic delivery squeeze. When short sellers are unable or unwilling to source sufficient metal in time, they are forced to buy in the cash/physical market — which rapidly inflates spot premiums and borrow costs.
Why London became the focal point
London remains the principal physical hub for bullion settlement with dense vaulting infrastructure, established logistics channels and deep dealer networks. For many international contracts, London delivery is the accepted standard; when delivery obligations spike, the fastest route to satisfy contracts is to ship bars there, even at a premium.
Immediate market effects: borrow rates, premiums and logistics
The squeeze drives up borrow and lease rates as lenders demand higher compensation for lending metal, while spot premiums over benchmark prices widen to reflect scarcity and transport urgency. Freight, insurance and vaulting bottlenecks add to the delivered cost, placing pressure on short participants and increasing volatility for nearby expiries.
How traders, dealers and vault operators are responding
Dealers are reallocating inventory, expediting shipments and, in some cases, prioritising institutional delivery requests. Short sellers are racing to cover by buying spot metal or rolling positions to later expiries. Vault operators and logistic providers are managing increased throughput, sometimes at premium charges to secure fast transfer to London hubs.
Liquidity conditions have become patchy in the short term: while overall market activity may rise, the availability of immediately deliverable metal can tighten abruptly during squeezes. Traders should therefore monitor spot-premium moves, warehouse inventories and freight lead times for early warning signs.
For those re-evaluating derivatives exposure amid jagged liquidity, our BankNifty Option Tip offer tactical frameworks to think about volatility and margin implications when markets face settlement stress.
Position sizing and contingency access to financing or borrowing channels can make the difference between a controlled hedge and a costly forced buy-in.
Investor Takeaway
Indian-Share-Tips.com Derivatives Pro Tiger Gulshan Khera, CFP®, who is also a SEBI Regd Investment Adviser, observes that short squeezes in physical metals expose gaps between paper and physical markets; investors should prioritise liquidity buffers, review borrow/leasing terms and avoid crowded short positions to reduce forced-cover risk during delivery cycles.
Related Queries
How Do Borrow Rates and Spot Premiums React During a Metals Squeeze?
What Precautions Can Traders Take to Avoid Forced Buy-Ins at Delivery?
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
