CME trading halt intensifies market turmoil, silver and copper prices both hit record highs.

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Pushed by strong fundamentals and expectations of Federal Reserve rate cuts, silver and copper prices both soared to historic highs in Friday's turbulent trading, while a rare technical glitch at CME Group intensified the market's volatility.

On Friday, a cooling system failure at CME Group's data center caused a hours-long halt in its global derivatives market trading. With thin trading due to the US Thanksgiving holiday, the interruption further amplified price swings and temporarily led to a spike in the spreads of precious metals buy and sell prices.

As most CME trading activities resumed in the early morning Eastern Time, London Metal Exchange futures continued to rally.

Silver prices surged as much as 5.9% intraday to $56.53 per ounce, setting a new record high. Copper also hit a new high, with LME copper futures earlier reaching a record $11,210.50 per ton.

(Silver prices jumped 5.9% intraday)

The market generally believes that the current precious metals market is experiencing a "perfect storm" formed by supply shortages, improved macro outlook, and potential trade policy changes.

Silver: Tight Supply and Tariff Risks Intertwined

Wallstreetcn previously noted the direct reason for the rise in silver prices is growing concerns over supply.

Unlike gold, a large portion of silver demand comes from industrial sectors such as photovoltaic cells and electronic goods. This robust physical demand provides a solid foundation for prices.

Last month, severe supply tightness in the London market once pushed prices to historic highs. Although the inflow of nearly 54 million ounces of silver later eased the squeeze, the market remains distinctly tight, and silver’s one-month lending costs are still hovering above normal levels.

Analysis suggests these inflows into London are in turn putting pressure on other trading hubs, including China. Data from the Shanghai Futures Exchange shows their silver warehouse stocks have recently fallen to their lowest level since 2015.

Analysts at Commerzbank wrote in a Friday report:

In the short term, if China’s registered silver stocks continue to fall, further price increases cannot be ruled out.

In addition, potential tariff risks have become a focus for traders.

This month, silver was added to the US Geological Survey’s list of critical minerals, triggering market concerns over possible future tariff imposition.

Although 75 million ounces of silver have left COMEX warehouses since early October, fear of a sudden premium in US silver has caused some traders to hesitate to ship metals abroad.

Copper Market: Bullish Sentiment Heats Up After Industry Meeting

Wallstreetcn wrote that copper’s latest rally came after miners, smelters, and traders met in Shanghai this week, focusing discussions on market tightening.

Kostas Bintas, the high-profile head of metals at Mercuria Energy Group, reiterated his bullish view, warning that the rush to ship metals to the US might deplete inventories elsewhere in the world.

He said in an interview at the end of the industry conference organized by the Center for Copper and Mining Studies (CESCO):

It will be a big problem; if things continue this way, there’ll be no copper inventory left in the rest of the world.

In recent weeks, traders have been ramping up copper shipments to the US to capitalize on the large premium for metals on COMEX, a premium driven by uncertainty over future potential tariffs.

Natalie Scott-Gray, senior metals analyst at StoneX Financial, stated:

Friday’s price surge was a response to bullish views coming out of the CESCO Shanghai conference.

She added:

This happens against the backdrop where we’ve already established a perfect storm bull-market narrative heading into year-end.

Macro Tailwinds and Speculative Waves Fuel the Rally

Aside from their respective fundamentals, macroeconomic tailwinds have also provided strong momentum for metal prices.

The market's expectation for further monetary easing by the Federal Reserve this month continues to intensify, seen as key to driving growth and demand in the world’s largest economy.

According to CME Group’s FedWatch tool, the market now puts the probability of a 25-basis-point rate cut at the December 10 Fed meeting at 86.4%, up notably from 71% a week ago.

More broadly, this year's metals rally also reflects an investment wave dubbed the "devaluation trade."

Since the start of this year, silver prices have surged more than 90%, partly because investors have flocked to alternative assets even as they have broadly exited government bonds and currencies. Ultima Markets analyst Elon Gu noted:

Technically, silver prices recently found support at the 50-day simple moving average during the pullback, which is a key technical indicator for sustained bullish sentiment, indicating the market's upward momentum remains firm.

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