Silver surged to over $45 per ounce on Friday, reaching its highest levels in 14 years. This increase is attributed to the interplay of anticipated lower real interest rates and a tightening supply. The recent Personal Consumption Expenditures (PCE) report indicated that inflationary pressures remain stable, suggesting that the Federal Reserve has the flexibility to further reduce interest rates this year. Market projections reflect expectations of another rate cut in the coming months. This anticipated move has reduced the carrying costs for non-yielding assets, heightening demand for precious metals.
Industrial demand for silver continues to be strong, driven by its use in solar energy, electric vehicles, and electronics manufacturing, pushing total industrial consumption beyond 700 million ounces and still climbing. The supply side, however, struggles to keep pace, as silver is primarily a byproduct of mining other metals like copper, lead, and zinc. As a result, production only slightly increased to approximately 844 million ounces in 2025. This increase was insufficient to rectify the significant structural deficit in the market. According to forecasts from the Silver Institute, a fifth consecutive year of shortfall is expected in 2025, with demand outstripping supply by over 100 million ounces, leading to a depletion of inventories.
