Silver hits record highs; what is fueling the surge?

2025 has been an eventful year for the financial markets with significant volatility. The geopolitical environment has been influenced by tariffs, ongoing conflicts and wars, as well as sticky inflation. On April 2, 2025, President Donald Trump introduced the Liberation Day Tariffs. by US president Donald Trump on April 2. 2025 This caused a significant market reaction and the S&P 500 index fell nearly 5% the following day. Indices and equities around the world fell similarly. Due to economic turmoil, investors have fled to traditional safe havens like gold and silver, causing significant price increases. So far in 2025 silver has significantly outperformed gold, despite both having shown very strong gains. Gold is so far up about 66% since the start of the year, while silver has surged almost 120%. A significant supply shortage is one of the key factors behind the rise in silver prices. The silver market has experienced consecutive deficits for several years, meaning that the global demand has consistently exceeded supply. The decline in physical inventories and scarcity have particularly tightened the market, often accentuating price movements as demand increases. Industrial demand for silver also plays a significant role. Large investments by companies in data centers and technology consume large amounts of silver, due to its conductive properties. Therefore, silver plays a significant role in technological infrastructure, especially with the current boom in artificial intelligence boom and the massive investments in the sector. 

In times of economic uncertainty and market turbulence, investors typically turn to safe-haven assets, such as gold and silver. These tend to be negatively correlated with the stock markets during times of market stress. Due to the market volatility experienced this year, prices have increased. Lower interest rates also tend to favor precious metals because they are non-yielding assets. The repeated interest rate cuts seen by central banks around the world this year have made the precious metals more attractive assets. 

Silver has shown unusually strong performance so far this year, climbing nearly 120% since the beginning of the year. This traditionally stable, low-volatility investment has massively outperformed high-beta tech stocks, such as Nvidia and AMD, as well as cryptocurrencies such as Bitcoin and Ethereum. Currently, the price of silver is approximately USD 63 per ounce, a significant increase from January when the price was around USD 30 per ounce. Vontobel offers a wide range of leverage products with silver as underlying, and you can gain both long and short exposure depending on your view.

Due to its heavy industrial use, silver is far more cyclical than gold, making it a less reliable hedge. The AI boom is clearly behind the price rally, as silver is increasingly being used in infrastructure related to data centers used to power the technology. Lower rates are bullish for precious metals, and with the Federal Reserve’s recent rate cut of 25 basis points may continue the rally. Over the past year, the US dollar has also weakened over the year against other major currencies, such as the Euro. Traditionally, silver and gold are priced in USD and tend to rise when dollar weakens. It will be interesting to see how the price of silver develops in the coming months. Some profit taking has already occurred, causing a pullback from the all-time high. However, the price is still comfortably sitting around USD 63, up significantly so far this year.