Silver powers past USD 40 to 14-year highs

Key Points:

• Silver breaks above USD 40/oz, extending a 37.5% YTD rally amid modest positioning and supportive macro drivers
• Industrial demand from solar, EVs, and electronics adds structural support, while jewellery faces price sensitivity
• Persistent supply deficits and relative value versus gold suggest further upside, but volatility will remain high

Silver has climbed above USD 40 an ounce to its highest level in 14 years, extending a rally that has already delivered a 37.5% year-to-date gain. Gold is up 31% over the same period, but silver’s outperformance reflects its dual role as both an investment and industrial metal. The latest advance is not the start of a new trend but a continuation of a rally that began in 2022, driven by the same macro forces supporting gold. Most recently, expectations for rate cuts have intensified as Trump’s tariff policies threaten growth while keeping inflation sticky, compounded by concerns over Federal Reserve independence and rising geopolitical risks. Silver’s relative cheapness to gold has added momentum, with the gold–silver ratio near 85, above its five-year average around 82. While gold must push through fresh record highs to extend its rally, silver still trades well below the 2011 peak of USD 50, leaving room for further investment demand.

Macro tailwinds and relative value

The steepening of the US yield curve which primarily has been led by lower yields at the front in anticipation of US rate cuts lowering the opportunity cost of holding non-yielding assets, lifting demand for investment metals. At the same time, political pressure on the Fed has raised fresh concerns about its independence at a time where the US debt pile continues to grow, adding to the safe-haven bid. Speculators in the futures market have so far entered this rally with relatively modest positions, leaving room for momentum accounts to add exposure as prices break higher. This dynamic was visible in the latest Commitment of Traders report, where gold and silver longs were only just beginning to rebuild ahead of the latest breakout. With the gold–silver ratio still trading above historical averages, silver continues to offer relative value compared with gold.

Industrial demand offsets volatility

Unlike gold, silver is split roughly evenly between investment and industrial use, giving it two engines of demand. Growth in solar, electric vehicles, and electronics continues to push industrial consumption higher, with photovoltaics alone now accounting for nearly one-fifth of total demand.  Electronics are far less sensitive to rising silver costs given the small share of silver in overall production, while jewellery demand is more price elastic and could soften if prices stay elevated. Meanwhile, investment demand via RTFs remain strong, adding another price-supportive driver with the latest data (source: Bloomberg) showing total holdings rising to a three-year high. 

Supply deficits show no sign of easing

The supply side remains constrained. Silver is largely produced as a by-product of mining other metals, meaning higher prices do not automatically translate into higher output. Mine supply has been slow to respond even after several years of deficits with surveys pointing to a seventh consecutive year where mined production has failed to meet growing demand. Recycling has picked up, but it is not enough to fill the gap. As a result, above-ground inventories are being drawn down, and this trend is expected to continue. While speculative interest most notably through the futures market continues to ebb and flow, at times creating elevated volatility and deep corrections, persistent deficits remain a key long-term factor supporting prices, alongside rising industrial demand. 

Conclusion

Silver’s break above USD 40/oz reflects the convergence of supportive macro forces, firm industrial demand, and stubborn supply deficits. While volatility will remain higher than in gold—silver often behaves like gold on steroids—the structural outlook remains supportive. For investors, the latest move is not a standalone spike but part of a broader rally potentially with more room to run. Relative value versus gold, continued deficits, and resilient industrial demand suggest dips will attract buyers. Managing to establish a succesful foothold above USD 40 may eventually turn the attention to the 2011 high at USD 50 as the next major potential target.