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Silver's 2025 ascent: Why there's so much more to the metal
Silver has been called “poor man’s gold”, but it has certainly enriched all kinds of investors this year
Silver has jumped more than 70% in the past year, rising along with gold as investors seek safety and an inflation hedge in precious metals. Silver was trading at about $51 per ounce in the London spot market Friday, down from its all-time high above $54 in October.
The metal is used in jewellery, but it also is very important in industrial applications which are growing. For instance, it is used in the manufacture of electric vehicles, electronics, solar panels and in medical devices.
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“Silver has predominantly been driven by a substantial increase in ETF flows, so that makes it a little vulnerable to further price correction,” said Suki Cooper, head of global commodities research at Standard Chartered. “But beyond the first quarter of next year, we think it will regain upward momentum and test fresh highs into the year end.”
ETFs are exchange traded funds. Investors can gain different types of exposure to the metal through such things as silver ETFs, mining company equities, mining company ETFs, bars, coins, and also jewellery.
Cooper said she expects the metal to average $50 an ounce in the current quarter, but climb to an average of $57 in the fourth quarter of next year. On an annual basis, she expects an average $38.80 per ounce this year and an average price of $52.80 next year.
Bank of America expects higher prices even though it sees an 11 per cent decline in demand next year. In October, the firm forecast that silver could rise to as high as $65 an ounce in 2026, and average a price of $56.25 across the year.
The US government last week declared silver to be a critical mineral, raising speculation for new tariffs on the metal as the it encourages more domestic production. The US currently imports about two-thirds of the silver it consumes.
“It does not change the price outlook,” said Cooper. She said the market was widely expecting the classification of silver as a critical mineral. The market is now awaiting news on potential US tariffs, but silver has already received some exemptions.
Fear of tariffs has already led to turbulence in the silver market. Inventories in the US were building all year on speculation the metal would be tariffed. That supply shift peaked in early October.
That coincided with heavy demand from ETFs and more buying from India ahead of Diwali.
That demand contributed to temporary shortages in London and a price squeeze in a very tight market. London is the largest storage centre for silver. But supplies have since returned to London vaults at a historic pace in recent weeks.
Bart Melek, global head of commodity strategy at TD Securities, said he expects these type of squeezes to become a more frequent phenomena in the next couple of years. The squeeze in October was due to supply being in the wrong place, but the market is also in deficit. He said the market is 100 million ounces in deficit this year and could be in deficit by the same amount in 2026.
“The move towards $55 was very much because we drained liquidity form the LBMA market and there was a squeeze. Now we’re seeing the (arbitrage) go the other way,” he said.
Melek said another reason prices eased after October’s record high is that more metal became available.
“We’re seeing metal from Asia, typically byproduct metal from the smelting of copper, zinc and others that normally would get all absorbed locally,” he said. “It’s looking for a home in India and some of it is no doubt making it onto the LBMA (in London), meaning that’s relieving the pressure and that’s why prices are moving down.”
Since ETFs have been a big driver of price this year, Cooper said investors should be aware of the impact of flows into and out of the funds.
“We have seen quite sizeable redemptions,” she said, adding that the flows can move swiftly in either direction.
She said the ETFs are popular with retail investors and that group “tends to be more nimble in terms of the flow. You can see quite sizeable redemptions materialising, and in October, we’re already down 480 tons, but for the year-to-date we’re still up 3,000 tons.”
High prices can also trigger demand destruction, or reduced demand from industrial users who can switch to other metals or combinations of metals, including nickel, copper and aluminum.
Marc Chandler, chief global market strategist at Bannockburn Global Forex, said it is not clear whether the US will impose new tariffs on silver or not. He points out that the US has put tariffs on aluminum from Mexico and Canada, so there’s the potential for some type of tariffs to be placed on silver. Mexico and Canada are the biggest suppliers to the US.
“Silver is up because of this and partly because of gold” prices, said Chandler. “The chart looks bullish. The trick is we’ve never been at these levels before so it’s hard to know how high it can go.”
Cooper said the trading dynamic around silver has changed.
“Silver’s been interesting in that in the last couple of years, it’s followed in the footsteps of copper more closely,” she said. “But we have a market that’s been severely undersupplied for the last few years… There’s plenty of above ground stock, it’s not necessarily resulted in higher prices. So there are a few dynamics that shifted this year that enabled it to move higher.”
Silver, along with gold, has benefited from weakness in the US dollar, stemming from concerns about fiscal deficits and climbing debt.
“Longer term, we continue to like it,” Melek said.
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