At Dillon Gage, a refinery in Texas, workers are toiling round the clock to melt down jewellery, dining sets and even old dental fillings, but it is still struggling to keep pace with customers’ rush to sell the family silver.
“We are running three shifts, seven days a week,” says president Terry Hanlon. “We can’t keep up.”
Hanlon is not alone. Last year’s blistering rally for silver has gone into overdrive, with prices breaching $90 an ounce this week and, despite a pullback on Friday, still up by around one-quarter this year. The metal has now tripled in value over the past 12 months amid wild price swings. Dealers say stocks of silver coins are selling out in record time, while precious metal traders warn of a global shortage.
The eye-popping gains — eclipsing even gold’s historic rally — have come as a surge of speculation by retail investors has collided with a five-year shortfall in silver supply. At the same time unusually high silver stockpiles in the US and China have drained supplies of bullion from vaults in London, where global prices are set.
“It is the perfect storm,” says Philip Diehl, former director of the US Mint. “We have been in a long-term supply deficit, and it is just getting worse.”
Often seen as gold’s less illustrious cousin, silver has emerged as an even bigger beneficiary of the geopolitical jitters and concerns about the safety of the US dollar that have driven the yellow metal to a string of record highs.
Investors seeking an alternative haven have been joined by a flood of retail money, straining the functioning of a market that has traditionally been dominated by industrial users and jewellers.
Average turnover is just $24bn a day in the London market, compared with $160bn for gold, according to statistics from the London Bullion Market Association.
Unlike gold, which is widely stored by central banks, there is no silver seller of last resort when prices start to soar. And production is relatively unresponsive to price changes, because it is mostly mined as a byproduct of other metals, such as lead and zinc.
The big intraday swings in silver futures prices have forced CME to raise margin requirements on futures contracts repeatedly in recent weeks, and on Monday it announced it would start setting margins as a percentage of contract value, rather than a dollar amount.
Individual investors have poured a record $921mn into silver-linked exchange traded funds over the past 390 day, according to data from Vanda Research.
“Nobody sees this as a rally drive by the fundamentals,” said one market participant in London. “It’s more of a retail investor bandwagon.”
Many draw parallels to the 2021 squeeze driven by Reddit — when users of the online platform invested in GameStop and in silver — which briefly drove silver prices up by about $5 to reach $30 per ounce. But in comparison, this rally is much stronger and longer lived.
“This isn’t just a meme stock spike; we are witnessing a structural accumulation that has now surpassed the heights of the 2021 ‘silver squeeze’,” wrote Vanda analyst Ashwin Bhakre in a client note.
At Sharps Pixley, a bullion dealer in London, UK manager Giles Maber said products were flying out the door amid a “physical run on silver” that is unprecedented.
“Anything that comes in, in the morning, is gone by lunchtime,” said Maber. “Customers are asking us for anything that we have got.”
Popular products such as capital gains tax-free silver coins have also sold out — the UK’s Royal Mint informed its dealers on Thursday of an unusual four-to-six-week wait until it can replenish stocks.
The rising silver holdings of ETFs mean that the “free float” — readily available material in the London market — is lower than normal. Although the amount of silver in the City’s vaults has been rising in recent months, the majority of this is locked up by the ETFs and not readily available to the market, according to analysts.
Last year, a huge silver stockpile built up in the US over fears that President Trump might tariff the metal — although those fears have now eased, prompted silver to start flowing back to London.
At the same time, China tightened its rules for silver export licences at the start of this year, leading to fears the country could start to restrict silver flows.
“Thinner inventories create conditions for squeezes, where rallies accelerate as investor flows absorb remaining metal in the London vaults,” wrote Goldman Sachs analyst Lina Thomas in a client note.
Those meagre inventories have pushed up silver lease rates — the cost of borrowing metals — which hit record highs late last year but eased off slightly this week.
Unlike gold, silver is widely used in industrial applications — from solar panels to electric vehicles to electronics — which typically account for as much as half of annual global silver demand.
“Silver has become like a crypto asset, because of its volatility,” said Nicky Shiels, an analyst at MKS Pamp, adding that the price surge could “kill off industrial demand and jewellery demand”.
But at Dillon Gage, there is no sign of a let-up in demand. The refinery is reporting a three-week turnaround time for its silver refining lines, which normally take just 48 hours.
“There is not a shortage in silver,” says Hanlon. “The hang-up is that there is so much metal coming in from sources that are not pure product.”