What Moves the Silver Price?
Monday, 8/18/2025 10:25
Silver investing gaining attention at multi-year price records...
With GOLD PRICES at record highs, investing in silver and the other white precious metals has been gaining attention as a pro-growth, industrial alternative,
writes Adrian Ash at BullionVault...
...and not just from investors.
"What factors influence the price of silver?" asks a journalist.
First up, there's gold. Because with the 'safe haven' trading at all-time records, silver has hit 14-year highs in Dollar and Euro terms, and it just set a record month-average high in UK Pounds.
Yet silver has very different demand and supply dynamics to gold, and it lost its use as money almost a century before gold's was finally abandoned in the early 1970s. But it has retained its underlying investment appeal as a hard asset, a tangible store of value.
That keeps silver very much in gold's orbit, and its price over the past half-century has moved in the same direction as gold's 77% of the time day-to-day, week-to-week and also year-to-year.
Correlation isn't causation of course, as statisticians like to remind us,
whether or not they still have a job.
But for gold and silver, their rolling 1-month daily price correlation of +0.84 across the past 50 years makes them pretty much joined at the hip.
Close behind the yellow metal and its current record-high prices?
Speculation. Because silver's daily price movements are on average 76% more volatile than gold.
That comes thanks to silver being a much smaller market...
...around 1/10th the value of gold both in daily trading volumes and annual end-use demand.
So speculative flows (in or out) move the price more dramatically than gold.
It's also because the resulting volatility then attracts speculative traders seeking quick gains, fuelling that volatility itself in turn and
earning silver the infamous tag of 'devil's metal' among hedge funds who've been blown up by the white metal's fast and furious swings.
Versus gold, in fact, silver has on average been almost twice as volatile on a daily basis over the past half-century.
Then comes economic growth. Or the lack of.
Silver finds over 50% of its net demand from productive rather than investment or adornment uses, more than 5 times the proportion for gold.
So while silver lacks any monetary role today (a stark contrast to gold's strong and growing place in central bank reserves) it is often seen as a pro-growth, industrial alternative to the safe haven.
Hence its occasional correlation with base metal copper...
...which is known as 'The metal with a PhD in economics' thanks to it tracking and mapping how financial traders see the outlook for global economic demand.
"Okay," our new friend asks, "so how might the price of silver develop in the short and medium term?"
We have no idea. And besides, as a trading exchange, we don't make price forecasts.
But our latest poll of BullionVault users (running 25 June to 7 July) saw 1,075 investors predict on average that silver will end this year at $41.18 per Troy ounce...
...a record-high end-December price in Dollars.
Driving that forecast, our respondents (65% of whom said they currently own silver; 92% said they own gold) believe that Geopolitics will be the single most important factor for precious metals prices between now and New Year 2026, followed by anxiety over Government debts and deficits.
Take note meantime: On a month-average basis, silver has already set new all-time highs in many major currencies...
...not least the UK Pound...
...and it's challenging the Deutsch Mark equivalent peak of January 1980 in Euro terms, too.
"And further ahead," asks the reporter, "how might the price of silver develop in the long term, say to 2030, 2040 or 2050?"
Further out, who can guess?
But while gold's influence is likely to remain central to how silver performs, it's important to note three other key factors.
First, the lack of central-bank demand for silver means that, long term, it has underperformed its 'safe haven' cousin...
...falling from its historic price ratio of 15 ounces per 1 ounce of gold in the early 1970s to worse than 90 ounces today after hitting 'depression-era' level of 100-to-1 during both the Covid Crash and then Trump's trade-tariff shock this spring.
Some analysts and pundits expect this relationship, known as
the Gold/Silver Ratio, to see a reversion to the mean in the years ahead...
...and the GSR has averaged 63 over the past 50 years.
As for silver in Dollar terms, some forecasters believe that its current upmove is strong enough to challenge the long-term peak of US$50 per ounce (touched in 1980 and again in 2011).
But it's worth noting that even that level would still mark a 50% drop in silver's real, inflation-adjusted price compared to its peak of 14 years ago, or a drop of 75% compared to 1980's peak.
That said, however,
silver's strong industrial uses, most especially in photovoltaics (solar energy)...could in the future perhaps spur strategic stockpiling by national governments wanting to ensure plentiful long term supplies.
While it isn't deemed to be a 'critical mineral' by the USA today, silver is indispensable in electricals and therefore in electronics. But as industrial demand continues to grow, new silver supplies are more constrained, because two-thirds of its mining output comes as a byproduct from other projects (copper, lead, zinc mines).
That makes it relatively inelastic to price. Hence the big driver of long-term silver investing today: the lack of supply to meet demand.
The
global silver market will this year record its fifth major deficit in a row, and although these strong supply-demand conditions have so far had only a limited impact on price, silver's market deficit is attracting attention from long-term investors whilst also eating into the metal's above-ground inventories.
To be clear, there are still huge above-ground stockpiles of silver (not least in the form of jewellery) and a steep price rise would likely see them mobilized in part. Recycling recovery rates from existing solar panels are also starting to improve, helping to supply the silver needed for replacement and new installations.
But like copper (also a vital metal in the green-energy and wider electrification transition) silver has been mined around the world since time immemorial, so it's unlikely that there are enough large, undiscovered reserves waiting to meet future demand at current prices.
How this will play out over the decades ahead is, of course, unknowable today. Moreover, PV and other manufacturers will also keep working to reduce the quantity of silver needed in each unit of their technology (known as 'thrifting')...
...while the path to a world covered in solar panels won't run in a straight line even if it becomes a reality.
The European Union, for instance, is
expected to install less new solar capacity in 2025 than it did last year, marking the first annual decline in almost a decade on one estimate.
Giant solar-installer China is meantime facing huge overcapacity in other elements of the PV supply chain,
most of all polysilicon.
That's why the Beijing authorities are trying to push the industry to consolidate, killing off unprofitable plants with an as-yet unfunded $7 billion plan to create "sort of like the OPEC of the polysilicon industry," according to one spokesperson, setting output quotas to try stabilizing long-term prices.
Still, and with gold now firmly established as a key portfolio asset for investors and a geostrategic must-have for central banks, the relative cheapness of silver is likely to gain more and more attention.
Like when journalists start asking about it.
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