The price of silver has surged to a historic peak, breaking through the $62 per troy ounce barrier for the first time ever. This landmark achievement was fueled by a buying frenzy following the US Federal Reserve’s latest interest rate decision, marking the third consecutive cut. The precious metal has seen its value nearly double over the past year, with a gain of approximately 17% in the last month alone.
Industrial Demand Creates Structural Support
Beyond immediate monetary policy, a powerful structural shift is underpinning silver’s strength. Its role in modern technology is expanding rapidly. According to the Silver Institute, the share of industrial demand attributed to photovoltaics has jumped from 11% in 2014 to 29% in 2024. Furthermore, electric vehicles require between 25 and 50 grams of silver per vehicle, representing a 67% to 79% increase compared to internal combustion engines. Demand from data centers and other tech applications adds further pressure.
This industrial appetite is colliding with a constrained supply chain. Silver is primarily mined as a by-product of gold, copper, and zinc extraction, limiting the ability to quickly ramp up production in response to higher prices. The recent classification of silver as a critical mineral in the United States has also redirected significant metal into domestic storage, potentially ahead of future tariffs, tightening availability for other global regions.
Physical Market Strain and Investment Flows
Clear signs of stress are evident in the physical market. Inventories held at the Shanghai Futures Exchange have dwindled to their lowest level since 2015. Meanwhile, exchange-traded funds (ETFs) dedicated to silver have recorded their strongest weekly inflows since July. In London, lease rates remain elevated, a traditional indicator of tight immediate supply.
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On the investment front, the landscape is poised for a shift. While institutional speculators have recently reduced their net positions on the COMEX market to a 19-month low, this light positioning could rapidly reverse if the price strength continues, potentially injecting additional momentum into the rally.
Monetary Policy and Market Dynamics
The Federal Reserve’s decision to lower its benchmark interest rate by 25 basis points to a range of 3.50% to 3.75% acted as the immediate catalyst. A weaker US dollar, a typical consequence of such easing, reduces the carrying cost for precious metals and enhances their appeal for international buyers. Market projections now suggest the possibility of two further rate cuts in 2026.
The silver market’s relatively small size—approximately one-tenth the scale of the gold market—amplifies price movements. This lower liquidity means that even moderate capital flows can lead to disproportionate gains. The gold-to-silver ratio currently sits near 68, close to its historical average and a significant retreat from the extreme levels above 100 seen in April.
Key Data Points:
– Silver price peaked at $62.36 per troy ounce
– Year-to-date performance exceeds 100%
– Gold, for comparison, shows a 58% annual gain
– The global market is headed for its fifth consecutive annual supply deficit
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