Silver prices surged above $40 an ounce on Monday for the first time in more than a decade, fueled by mounting bets that the US Federal Reserve will cut interest rates this month.
Spot silver rose 2.04% to $40.55, its highest since September 2011, before easing back to $41.34 on Thursday, down 1.7%.
Analysts attributed the latest rally to reduced liquidity during the US bank holiday, which bolstered safe-haven metals like gold and silver. Expectations of Fed rate cuts and a tight supply backdrop further supported the move.
Ole Hansen, head of commodity strategy at Saxo Bank, said: “Silver has broken above $40 an ounce to its highest in 14 years, extending a rally that has already delivered 37.5% gains this year. By comparison, gold is up 31% in the same period, but silver’s outperformance reflects its dual role as both an investment asset and an industrial metal.”
Hansen noted the surge is not the start of a new trend but part of an ongoing rally since 2022, underpinned by the same macroeconomic forces lifting gold. He pointed to heightened expectations of rate cuts, Trump’s tariff policies that risk dampening growth while keeping inflation elevated, concerns about Fed independence, and rising geopolitical risks.
He added that silver’s relative cheapness compared to gold gave it extra momentum, with the gold-to-silver ratio near 85, above the five-year average of 82. While gold needs new record highs to extend its rally, silver still trades below its 2011 peak near $50, leaving scope for further investor demand.
Industrial Demand Stays Strong
Hansen emphasized silver’s unique industrial underpinning: “Silver shares the same macro drivers as gold—dollar, real yields, rate sensitivity—but also benefits from robust industrial demand, especially in solar and electrification.”
Forecasts suggest another notable supply deficit this year, albeit smaller than 2024. Structural shortages have repeatedly limited downside corrections even during periods of dollar strength or reduced easing expectations.
After breaking through resistance near $35 in June, silver has tended to find buyers on dips, with volatility higher than gold due to its hybrid role.
The rally coincided with gold hitting a four-month high at $3,483.59 on Monday, up 1.03%. Unlike gold, however, silver’s demand is split almost evenly between investment and industry, giving it two growth engines. Photovoltaics alone account for about 20% of global demand. Jewelry demand could ease if prices remain elevated, but ETF inflows remain robust, with holdings at their highest in three years.
Rate Cut Bets and Dollar Weakness Drive Precious Metals
Comments from San Francisco Fed President Mary Daly last Friday encouraged traders to overlook a stronger-than-expected core PCE reading, reinforcing bets on a 25-basis-point cut this month.
The dollar came under further pressure after a US appeals court ruled most of Trump’s tariffs illegal, sending gold to a four-month high and silver to a 14-year peak.
Fresh PCE inflation data showed a 0.2% monthly rise and 2.6% annual increase, broadly in line with expectations, keeping precious metals supported.
Shifts in Global Silver Market Dynamics
Silver is increasingly seen as a hedge asset, drawing interest from institutional investors such as pension funds and mutual funds. This trend could underpin a long-term rally similar to gold’s trajectory.
The US remains the largest silver investment market, led by pension demand. India follows closely and may soon overtake, given last year’s record imports. Germany and Australia also remain key markets, with coins and bullion as the most popular forms.
Silver’s Road Toward Record Highs
The clear breakout above $40 has sparked speculation about revisiting the historic $50/oz level. While difficult to achieve this year, analysts say it cannot be ruled out.
Two key drivers will be Fed monetary policy and US trade tariffs. If the Fed eases policy while the government tightens tariffs, the twin forces could push silver closer to record highs. Technically, the next target is the 2011 peak at $44, with $50 in view longer term.
Short-term corrections remain possible, offering buying opportunities near $40 support, which also aligns with the uptrend line. A deeper pullback could test $37 support, a level that has held repeatedly in the past.
