Silver Prices Shine Brighter Than Gold: Here’s Why

Industrial Demand Powers Silver’s Momentum

Silver's unique status as both a precious metal and an industrial metal is at the heart of its 2025 rally. Over 70% of silver demand around the world comes from industries, with the main drivers being the renewable energy sector, electronics and electric mobility.

Barring any further significant global economic challenges, energy transition policies are already in place for continued accelerated adoption. Many countries are decarbonising and that means increased demand for silver, particularly in the production of solar panels, electric vehicle (EV) batteries and advanced electronics.

The industrial foundation, which is backed by increasing energy transition efforts, is widely referred to by analysts as a long-term driver for silver prices, with the primary objective being the industrial usage. On the other hand, gold derives most of its value based on investment and jewellery.

Fed Policy and the Dollar Connection

Monetary policy has also been a significant driver. The Federal Reserve’s reduction of interest rates by 25 basis points on September 17 spurred the silver rally into a new leg.

The market appears to expect the Fed will cut rates in October at its next meeting if labour market weakness persists. Historically, when the Fed cuts rates, it leads to a weakening of the U.S. dollar, which makes dollar-denominated assets, such as silver, more attractive to global investors

Volatility and Macro Risks Remain

Even with solid advances, market participants should still exercise caution. Silver’s exposure as both an industrial commodity and a precious metal gives it extreme sensitivity to both economic trends and changes in monetary policy.

In the short term, volatility remains an issue, particularly as ongoing geopolitical risks and macroeconomic uncertainty linger. Traders and investors are being urged to continue to hedge silver exposure against broader portfolio risk management.

While the global economy weathers out inflation concerns, clean energy transitions, and potentially rate cuts, silver's unique position in both industrial and investment demand suggests that its run might not be over yet.

FAQs

Why has silver performed so strongly in 2025?

Silver's strong performance is being driven by the strong industrial demand, the Federal Reserve cutting interest rates, and a continued global supply deficit.

How Does Industrial Demand Influence Silver Prices?

More than 70% of silver demand comes from industries like renewable energy, electronics and electric vehicles. This makes the price of silver sensitive to economic growth and clean energy.

What role does U.S. Federal Reserve policy play in silver prices?

Rate cuts from the Fed tend to devalue the U.S. dollar, which leads to higher silver prices as the asset class is more attractive globally.

What is causing the silver supply deficit, and how does it affect the market?

For five years, silver supply lagged behind demand due to limitations on silver supply. Silver is frequently not produced by design, but as a byproduct of mining other metals, indicating a strong floor in price.

What does the declining gold-silver ratio mean?

The declining gold-silver ratio indicates that silver is undervalued compared to gold and likely to outperform in the current environment of strong industrial demand and the silver supply deficit.