What does the silver rally mean?

Claudio Wewel, FX Strategist at J. Safra Sarasin Sustainable Asset Management, explores what has driven silver’s dramatic rally and what it means for investors.

Silver has seen a stellar year-end rally that extended well into the first few weeks of 2026. In 2025, the metal added almost 150%, outperforming gold.

The silver market has been in a structural supply deficit for the past five years. Yet this had not catalysed a major price reaction until 2025, when silver’s upward trend accelerated and turned parabolic towards year-end. We attribute the steep upward move, which outsized the absolute price increases preceding the 1980 and 2011 peaks, to a combination of several factors:

1. Falling US rate expectations.

In the second half of 2025, the market began to shift its focus to the nomination of Fed Chair Powell’s successor. The expectation of a more dovish Fed with several rate cuts in 2026 have weakened the US dollar and raised the attractiveness of non-interest-bearing investments such as silver and gold.

2. Addition to the US list of critical minerals.

In early November 2025, the US Department of Interior added silver to its list of critical minerals. Owing to its superior electrical conductivity, the material is crucial for the manufacture of high-performance chips and the AI buildout. Its addition to the list, along with fears of potential US tariffs on silver, signalled potential supply risks to the market and led to a front-loading of silver shipments to the US. In consequence, the London market experienced physical outflows, resulting in a shrinking of local silver reserves.

3. Chinese export restrictions.

Since the beginning of the year, China applies stricter controls to silver exports. The decision is part of a broader move to secure critical minerals and only allows government-approved companies to export silver in the 2026/2027.

4. Growing importance as store of value.

Lastly, silver has increasingly gained traction as a monetary metal. Compared to other commodities, its cost of storage is low, and the metal has a long-standing record as a key material for minting coins. The high per-unit cost of physical gold purchases is effectively excluding more lower- to middle-income buyers in emerging markets, such that silver is emerging as a “cheaper” alternative to gold in these markets. In consequence, household demand has picked up in India and China. In Shanghai, buyers are paying a premium of around USD 10 on top of the London per-ounce price.

Silver’s sharp price surge has brought the gold-to-silver ratio to around 50. Given that the measure has typically fallen to around 40 in past bull runs, silver can climb well above USD 100 per ounce in the current cycle. In principle, our positive view on gold points to such a move and speculative positions do not seem stretched.

While the physical supply deficit should support a high silver price level in the near term, we caution that silver usually experiences much larger drawdowns after an extended rally than gold, owing to its higher price volatility. Given momentum is fading, the risk/return balance has become less favourable for silver. This also means that it should be difficult for silver to outperform gold from here.