When vaults are running empty, and traders are airlifting metal across continents just to meet delivery deadlines, it’s a pretty clear sign something’s off in the supply chain. Silver has surged 99% this year, blasting past record highs above $58 per troy ounce and even eclipsing gold’s impressive 60% run. Now analysts are scrambling to explain how the so-called “Devil’s metal” managed to outshine its more celebrated cousin.

Silver crunch: Industrial demand for silver has been rising for years, but the current rally is being fueled by depleting mines, shrinking stockpiles, and rapidly growing demand from future-defining industries. Tariff worries are tightening the market further by keeping metal in the US as risk managers avoid exporting silver that could face 35% duties. Demand is only set to intensify, as electric vehicles currently use 25 to 50 grams of silver per car, and the transition to solid-state batteries could push that requirement above 1 kilogram, which would be a major shift for the market.

• Mine output has steadily declined across Central and South America due to closures and resource depletion, reflected in the gold-to-silver ratio tightening sharply from 89 to 73 recently.
• Borrowing costs surged so aggressively that overnight lease rates reached 200% annualized in October, leaving traders “very stressed,” according to Stone’s Rhona O’Connell.

No Metal to Spare

The real difference from the silver spikes in 1980 and 2011 is today’s severe imbalance between supply and demand. London vault inventories have dropped by roughly one-third since mid-2022, leaving the market scrambling for metal. Invesco’s Paul Syms notes that some traders even resorted to flying silver by plane rather than waiting for cargo ships, a sign of how tight conditions have become.

• Silver-related miners rose yesterday as investors chased pure-play picks, with First MajesticAG
  up 1.9%, Hecla MiningHL
  rising 1.7%, and Pan AmericanPAAS
  up 0.9%.
• The Federal Reserve’s expected rate cuts are lifting interest in non-yielding assets, with the iShares Silver TrustSLV
  and the SPDR Gold TrustGLD
  rising 95% and 58% year-to-date.

Metal of two worlds: Silver’s dual identity as both a precious and industrial metal gives it a unique setup for further gains. The Silver Institute expects a fifth straight year of market deficits in 2025, driven by tight production and growing demand from AI semiconductors, solar panels, and electric vehicle components. As Syms puts it, “Silver crosses over that bridge between precious and industrial metals, and the way technology is going on, the batteries, the solar panels, it’s got some great use cases as we move into a more electrified world.”