Silver is experiencing a remarkable price surge in 2025, positioning itself as one of the best-performing commodities in global markets. With its price nearing $38.5 per ounce, the precious metal has already gained an impressive 33% year-to-date, outperforming gold.
Silver's impressive rally is heading toward the peaks of 2011 and the late 1970s/early 1980s. While the current price is high, we aren't seeing significant overvaluation, especially when looking at deviations from the 5-year average. In the past, it took 5 deviations from this average to signal a clear overvaluation. Source: Bloomberg Finance LP
The current silver bull run is built on solid fundamentals that extend far beyond the speculative frenzy seen in the late 1970s. The silver market is grappling with a structural deficit that has now lasted for five consecutive years, while industrial demand is reaching record levels, driven by technological revolutions and the energy transition.
Structural Supply Crisis Fuels the Rally
A chronic shortage of physical metal in the global market is a key driver of silver's current gains. According to the latest analysis from the Silver Institute, the market is projected to face a deficit of around 170 million ounces in 2025, continuing a trend that began in 2021.
The problem lies in the unique structure of silver production, which is fundamentally different from other precious metals. Only 30% of the global supply comes from mines where silver is the primary product. The remaining 70% is produced as a byproduct of mining gold, copper, zinc, and lead. This structure prevents silver supply from responding flexibly to rising prices, as it depends on the profitability of other metals.
Silver is gaining relative to other industrial metals, though it's not yet extremely expensive compared to copper or zinc. Source: Bloomberg Finance LP, XTB
Global silver mine production has fallen by more than 7% compared to 2016, now standing at approximately 835 million ounces per year. Meanwhile, recycling has increased by 24% to 195 million ounces but still doesn't compensate for the decline in primary production. Experts predict this situation will worsen, as the outlook for new mining projects remains very limited.
The Explosion in Industrial Demand
On the demand side, a true revolution is underway. Industrial demand for silver reached a record 680.5 million ounces in 2024, with forecasts for 2025 indicating it will exceed the 700 million ounce mark for the first time in history. This surge is driven by several key technological trends.
The photovoltaic sector has become a primary driver of silver demand, increasing its consumption by 64% in 2024 to 193.5 million ounces. Analysts predict another strong increase in 2025, meaning solar panels could consume over 200 to 230 million ounces annually. This impressive growth rate stems from the global expansion of renewable energy sources, particularly in China, Europe, and the United States.
The electronics industry is also seeing a spectacular rise in demand, which grew by 20% in 2024 to 445.1 million ounces. The development of artificial intelligence, 5G networks, and the Internet of Things is generating unprecedented demand for silver, which plays a critical role in the production of semiconductors and electronic components.
Additionally, the electrification of transport is creating a new category of demand. Electric vehicles require significantly more silver than traditional internal combustion cars, and global EV sales are growing at a rate exceeding 30% per year.
The Gold-Silver Ratio Signals Undervaluation
One of the most important indicators of the relative value of precious metals, the gold-to-silver price ratio, is currently around 87. This is while the historical average fluctuates between 50 and 60, depending on the period considered. The 10-year average is approximately 80 points. This significant deviation from the historical norm suggests that silver remains undervalued relative to gold.
Historically, during precious metal bull markets, silver tends to outperform gold in the later stages of the cycle. This pattern is because gold typically leads the precious metals market as the primary store of value, while silver follows with a delay but often with greater intensity due to its smaller market and higher volatility.
A normalisation of the gold-silver ratio to its historical average would imply a potential for much larger gains for silver than for gold in the coming months. If the ratio were to return to a level of 60 with current gold prices, silver could reach above $55 per ounce, which would be a new all-time high for the silver market.
Macroeconomic Tailwinds for Silver
The macroeconomic environment also favours further silver price increases. Expectations of interest rate cuts by the Federal Reserve support precious metals by lowering the opportunity cost of holding them. Inflation data from August, which held steady at 2.7% instead of the projected 2.8%, strengthened expectations for a September rate cut, positively impacting silver prices. A further weakening of the dollar also makes silver more accessible globally.
It's worth noting that ETFs are significantly increasing their silver holdings. While they're still a long way from historical levels in terms of ounces, the value of silver held by ETFs has reached an absolute record, suggesting that silver could be priced higher.
Risks and Challenges
Despite the optimistic outlook, investors should be aware of potential risks. Silver is naturally highly volatile, significantly exceeding other precious metals. Sharp price corrections are a normal part of the silver cycle and can temporarily erase months of gains.
An economic slowdown could curb industrial demand, although historically, investment demand has often compensated for the decline in industrial consumption during such periods. Technological innovations that could reduce silver usage in certain applications pose a long-term risk, though the current trend is the opposite—new technologies are increasing demand.
A strengthening US dollar, if the Federal Reserve's rhetoric were to change, could negatively impact commodity prices. Likewise, a potential increase in silver recycling or the discovery of new deposits could affect the supply-demand balance, although this seems unlikely in the short to medium term.
Long-Term Outlook
The long-term prospects for silver remain very attractive due to the structural trends driving demand. The energy transition, the digitalisation of the economy, and the development of new technologies create a durable foundation for growing silver demand. At the same time, supply constraints, resulting from the unique production structure, are likely to deepen.
Analysts worldwide predict that the silver market deficit will persist for years, potentially leading to historic price highs. A scenario of silver reaching new records above $50 per ounce in the next 2-3 years is gaining more traction among market analysts.
Citigroup has raised its silver price forecast for the next 6-12 months to $40 per ounce, citing the growing physical metal deficit and rising demand. Bank of America also anticipates the $40 level by the end of 2025, supporting its forecast with fundamental analysis. JPMorgan presents similarly optimistic scenarios but points to a $38 level by year-end.
Long-term forecasts are even more optimistic. Some analysts predict new peaks above $52.50 in 2026, which would surpass the most recent highs from 2011, which are close to the levels from the late 1970s and early 1980s. In its latest survey of experts, the London Bullion Market Association indicates an average forecast of $43.50.
Silver offers a unique combination of monetary and industrial functions, making it attractive both as a hedge against inflation and an investment in technological megatrends. For investors seeking exposure to the energy transition while protecting against systemic risk, silver may prove to be an optimal choice in the coming months.
The current situation in the silver market resembles a set-up for a significant price jump that could bring spectacular returns to investors able to manage the inherent volatility of this market. History shows that the best investments in silver were made at times when market fundamentals were as strong as they are now.
Technical Analysis Points to Further Gains
From a technical analysis perspective, silver is in a solid uptrend, breaking through successive resistance levels. The breach of the key barrier at $35.40 has opened the way for significantly higher prices. In the short term, the key is to maintain the 30- and 50-day moving averages, while long-term, it's important to break through recent highs and rise to the vicinity of $42, where the next major resistance for silver is located.
Wheat drops amid higher than expected WASDE report
3 markets to watch next week (14.11.2025)
NATGAS slightly gains after the EIA inventories change report
US Open: US100 initiates rebound attempt 🗽Micron shares near ATH📈
This content has been created by XTB S.A. This service is provided by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, entered in the register of entrepreneurs of the National Court Register (Krajowy Rejestr Sądowy) conducted by District Court for the Capital City of Warsaw, XII Commercial Division of the National Court Register under KRS number 0000217580, REGON number 015803782 and Tax Identification Number (NIP) 527-24-43-955, with the fully paid up share capital in the amount of PLN 5.869.181,75. XTB S.A. conducts brokerage activities on the basis of the license granted by Polish Securities and Exchange Commission on 8th November 2005 No. DDM-M-4021-57-1/2005 and is supervised by Polish Supervision Authority.
