What’s driving the silver boom and how it will impact global markets
Silver just surged to $41 per ounce—its highest level since 2010. But this is no ordinary commodity rally. Unlike gold, which thrives mainly on safe-haven demand, silver sits at the intersection of finance, industry, and geopolitics.
It’s not just stored in vaults—it’s on rooftops, inside electric vehicles, in
5G towers, and at the heart of renewable energy technologies. When silver
moves, it’s telling a much deeper story about the future of technology, supply
chains, and economic outlook.
The Tariff Wildcard
One of the most immediate catalysts reshaping the silver market is geopolitics.
Silver’s role as a “critical mineral” has put it squarely on Washington’s
radar. Earlier this year, the U.S. officially classified silver as
strategically important for national security. That designation opens the door
to tariffs, stockpiling, and tighter export controls—all part of the Trump administration’s broader protectionist agenda.
Markets are already bracing for silver to be swept into tariff measures. If that happens, the ripple effects could spread quickly across the globe. The U.S., having labelled
silver a critical mineral, would likely move to build up its own strategic reserves. Once Washington starts stockpiling, other major economies will feel pressured to follow
suit to avoid being left behind:
• U.S. stockpiles → China builds reserves → Europe responds
→ Japan joins in.
• This sets off a chain reaction—fears of shortage push governments to buy more
silver, and that very rush to secure metal makes the shortage even worse.
In this environment, government buying could become a parabolic driver of
prices, adding another layer of demand on top of already tight industrial and
investment needs.
Macro Tailwinds: Dollar Weakness and Rate Cuts
The policy backdrop is also amplifying silver’s rise. Since the Jackson Hole
meeting, Fed Chair Jerome
Powell has struck a softer tone, and a run of weak jobs data has reinforced
expectations of a 25-basis-point cut in September, now priced with nearly 90%
certainty.
Those expectations have already pressured the U.S. dollar lower, making silver
cheaper for overseas buyers and lifting demand. At the same time, the prospect
of lower interest rates reduces the opportunity cost of holding non-yielding
assets like silver. Together, a softer dollar and easier rates are providing a
powerful tailwind for the metal.
The Supply Squeeze Driving Silver Higher
At the heart of silver’s rally is a tightening supply-demand balance that looks
increasingly unsustainable. The market has now entered its seventh consecutive
year of supply deficits, a structural shortfall that mining and recycling
simply cannot bridge.
The
World Silver Survey 2025 estimates a 117.6 million ounce deficit this year,
following last year’s 148.9 million ounce shortfall. That’s equivalent to
draining entire stockpiles year after year. In contrast to gold, where central
banks can adjust reserves, silver’s production structure makes it harder to
boost output quickly:
• Only 30% of global silver production comes from primary silver mines.
• The rest is a byproduct of mining gold, copper, lead, and zinc—industries
that won’t ramp up just because silver prices rise.
• Declining ore grades, higher production costs, and tougher environmental
approvals have kept new projects from coming online.
In short, silver supply is sticky, but demand is anything but.
The Industrial Backbone of a Green Economy
Silver isn’t just a precious metal—it’s an industrial necessity. Its unmatched
conductivity and durability make it irreplaceable in the technologies of
tomorrow.
Consider these numbers:
• Solar panels consume over 193.5 million ounces annually, roughly 14% of
global silver demand. With China’s solar cell exports up 70% in the first half
of 2025, that appetite is accelerating, with India emerging as a key buyer.
• Electric vehicles (EVs) require up to 50–80 grams of silver each, powering
battery connections, charging stations, and electronic systems.
• 5G networks, AI data centres, and advanced electronics are additional demand
engines.
Governments are pouring billions into green infrastructure and electrification
projects, and silver is embedded in every step.
Unlike copper or aluminium, where substitution is possible, silver’s properties
make it difficult to replace without compromising performance. That sets up a
structural floor for demand, regardless of short-term investor sentiment.
Stress Signals: Lease Rates and Comex Premiums
One of the clearest signs of tight supply is coming from the lease rate market.
Normally close to zero, silver lease rates in London have spiked above 5%—a
level rarely seen.
Lease rates are essentially the cost of borrowing physical silver, used by
banks, refiners, and manufacturers to cover temporary shortfalls. When rates
surge, it’s a red flag: available silver is scarce, and lenders are demanding
higher compensation to part with it.
Across the Atlantic, Comex premiums are flashing a similar warning. U.S.
futures are trading about 70 cents higher than London spot prices, meaning
buyers are willing to pay more just to secure immediate delivery in New York.
In practical terms, that’s a reflection of regional tightness—U.S. demand is
strong, but supply channels are struggling to keep up.
Looking Ahead
Silver’s rally shows strong momentum, underpinned by structural supply
deficits, industrial demand from solar, EVs, and advanced electronics, tight
physical availability, and macro tailwinds from a softer U.S. dollar and
anticipated Fed rate cuts.
Geopolitical factors, including its designation as a “critical mineral” and potential
U.S. stockpiling, add further upward pressure.
From a technical perspective, XAG/USD has decisively broken above the $36–37
resistance zone and is now trading near $41, confirming sustained bullish
momentum with higher highs and higher lows.
The immediate upside target lies at $43–44, a key resistance last seen in 2011,
while a break above that could open the path toward the all-time high of
$49.81. On the downside, $36–37 now acts as critical support, holding the
bullish trend intact.
Momentum indicators favour further upside, and as long as the metal remains
above this range, the broader trend remains firmly positive in the weeks ahead.
Domestically, ₹1,21,000–1,23,000 per kg will act as a strong support zone, with the rally aiming for a potential move toward ₹1,30,000–1,35,000 per kg.
Source: https://economictimes.indiatimes.com/