Why silver price has been surging even more than gold

[JOHANNESBURG] Gold has staged a dramatic rally this year as the US Trump administration’s unorthodox economic policies sent investors and central banks reaching for safe-haven assets. Right now, however, it’s silver that’s stealing the spotlight.

A squeeze in supply of the precious metal had catapulted it to a 100 per cent gain as at early December, while gold was up 60 per cent. Both have been experiencing a surge in demand from investors seeking to hedge against political turbulence, inflation and currency weakness.

Unlike gold, silver is not just scarce and beautiful: It also has many useful real-world properties that make it a valuable component in a range of products. With inventories near their lowest on record and investors still scrambling for more, there’s a risk of supply shortages that could impact multiple industries.

Who needs silver?

Silver is an excellent electrical conductor that’s used in circuit boards and switches, electric vehicles and batteries. Silver paste is a critical ingredient in solar panels, and the metal is also used in coatings for medical devices. Sustained high prices could erode the profitability of industrial users and spur efforts to substitute silver components for other metals.

Like gold, silver is still a popular ingredient for making jewellery and coins. China and India remain the top buyers of silver, thanks to their vast industrial bases, large populations and the important role that silver jewellery continues to play as a store of value passed down the generations.

Governments and mints also consume large quantities of silver to produce bullion coins and other products. As a tradable asset, it’s much cheaper than gold per ounce, making it more accessible to retail investors, and its price tends to move more sharply during precious metal rallies.

What makes the silver market unique?

Silver’s varied uses mean its market price is influenced by a wide array of events including shifts in manufacturing cycles and interest rates and even renewable energy policy. When the global economy accelerates, industrial demand tends to push silver higher. When recessions loom, investors can step in as alternative buyers.

The market is thinner than with gold. Daily turnover is smaller, inventories are tighter and liquidity can evaporate quickly. The silver stored in London is worth just shy of US$50 billion, while the gold is worth US$1.2 trillion, though much of both are not available to borrow or buy for investors.

For gold, the London market is underpinned by around US$700 billion of bullion held mostly by the world’s central banks in vaults of the Bank of England. This can be lent out when a liquidity squeeze hits, effectively making the central banks lenders of last resort, but no such reserve exists for silver.

Why has silver rallied so much this year?

Silver often moves in tandem with gold, but with more violent price moves. After the yellow metal surged in the early months of 2025, some investors pointed to the stretched ratio of prices between the two metals of more than 100-1. Silver’s apparent cheapness relative to gold was enough to encourage some investors to pile into the white metal.

Heavy debt loads in major economies such as the US, France and Japan and a lack of political will to solve them also encouraged some investors to stock up on silver and other alternative assets this year, in a wider retreat from government bonds and currencies dubbed the debasement trade.

Meanwhile, global silver mine output has been constrained by declining ore grades and limited new project development. Mexico, Peru, and China – the top three producers – have all faced setbacks ranging from regulatory hurdles to environmental restrictions.

Global demand for silver has outpaced the output from mines for five consecutive years, while silver-backed exchange-traded funds (ETFs) have drawn in new investment.

What was the silver squeeze that hit the market this year?

Speculation earlier this year that the US would levy tariffs on silver led to a flood of the metal into vaults linked to the Comex commodities exchange in New York, as traders sought to take advantage of premium prices in that market.

That contributed to a dwindling of available silver stocks in London, the dominant spot trading hub. Those stocks were further eroded as more than one hundred million ounces flowed into ETFs backed by physical bullion.

With a spike of demand during the Indian festive season in October, the market suddenly seized up. The cost of borrowing silver surged to a record, while prices jumped.

That tightness pushed London prices above other international benchmarks, helping to ease the squeeze. Traders are still monitoring for any potential US tariff on silver after the precious metal was added to the US Geological Survey’s list of critical minerals in November. BLOOMBERG