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.

(The author is MD, CR Forex Advisors)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)