Silver Prices Surge Amid Mixed Market Demand

(Bloomberg) — Silver prices have experienced a significant rise, with volatility on the upswing as industry groups highlight increased investment buying alongside a projected decline in industrial demand for next year.

On Wednesday, the metal increased by as much as 6.6%, which is notably higher—by about one-third—than last week’s low. Despite this, the silver market might face its sixth consecutive year of losses, as heightened investment interest is expected to overshadow falling demand for jewelry and reduced usage in solar energy, according to a report from the Silver Association.

Over the past year, silver’s value has skyrocketed, more than tripling in price fueled by robust investor inflows. However, the ascent abruptly came to a halt at the end of January, culminating in the largest single-day price drop on record. Though prices have somewhat rebounded since then, they continue to fluctuate, leading some traders to label silver as untradable.

Looking ahead, industrial demand for silver is projected to dip slightly by 2026. Even as solar installations expand, the Silver Association noted that continued cost-cutting and full substitution of silver will likely diminish its demand in solar power.

Additionally, demand for silver products is forecasted to drop by 17% due to rising prices, while jewelry demand could decline by 9%.

Analysts at BMO Capital Markets suggest that the influx of investors could shift existing silver inventories. However, they caution against interpreting the market conditions as “in the red.” Instead, they recommend assessing the silver supply against the actual consumption patterns of ornamental and industrial metals since those are the demands that truly draw bullion off the market.

BMO predicts that silver’s price may decrease relative to gold in the coming years as the physical availability of the metal improves.

In recent months, much of the speculative interest in silver appears to have stemmed from China. Domestic silver producers and traders are finding it challenging to meet backlogged orders, with front-month contracts on the Shanghai Futures Exchange hitting record levels.

Meanwhile, investors are keeping an eye on an upcoming jobs report due on Wednesday. U.S. 10-year Treasury yields remain at their lowest levels in nearly a month, and the dollar has fallen for four consecutive days, making gold more affordable for many buyers.

Any further cuts in U.S. borrowing costs would likely benefit non-yielding precious metals. Notably, President Trump’s nominee for Federal Reserve Chairman, Kevin Warsh, is advocating for additional rate reductions.