Silver crosses $100 an ounce as industrial demand, investor flows collide; what happens next

Silver prices surged past the psychologically significant $100-an-ounce mark on Friday, extending one of the most dramatic rallies seen in the precious metals market in decades. The metal touched a record high of $100.22 before easing slightly, as a potent mix of retail participation, momentum-driven trades and lingering tightness in physical supply continued to propel prices higher. The rally has unfolded alongside fresh record highs in gold and platinum, underscoring a broader strength across precious metals amid a sharply weaker US dollar.

The scale and speed of silver’s rise, however, have begun to trigger caution among market watchers, even as enthusiasm remains elevated.

Momentum drives silver’s outperformance

Silver’s ascent has been especially striking when viewed against gold. For the first time in 14 years, it now takes just about 50 ounces of silver to buy one ounce of gold, a sharp compression from over 100 ounces as recently as April. This ratio, widely tracked by traders as a valuation gauge, suggests silver’s recent outperformance has become stretched.

“Silver is in the midst of a self-propelled frenzy,” said Rhona O’Connell, analyst at StoneX, noting that the metal is benefiting from gold’s strength and its relatively lower unit price. While the rally has drawn in a broad swathe of investors, she warned that rapid gains also increase the risk of abrupt reversals once momentum fades.

Spot silver was last trading around $101 per ounce, marking a gain of more than 40% since the start of 2026, on top of a staggering 147% rise in 2025. Gold, meanwhile, hit a record high near $4,988 per ounce, reinforcing its role as a hedge against macroeconomic and geopolitical uncertainty.

Fundamentals versus froth

Some strategists argue that prices have raced ahead of fundamentals. Bank of America strategist Michael Widmer estimates a “fair” silver price closer to $60 an ounce, pointing out that demand from solar panel manufacturers likely peaked in 2025 and that elevated prices could begin to dampen broader industrial consumption.

Others, however, see deeper structural forces at work. Ponmudi R, CEO of Enrich Money, said the surge in silver prices reflects a deeper repricing of scarcity rather than a purely speculative blow-off. He noted that silver is increasingly being viewed as a strategic metal, given its expanding role across renewable energy, electric vehicles, electronics, defence applications and AI-driven infrastructure. Unlike gold, where central-bank buying is the dominant marginal driver, silver’s demand profile is far more diversified and less price-sensitive, creating a stronger demand floor even at elevated prices.

Investment demand and supply constraints

Silver’s exceptional performance in 2025 marked its strongest annual gain since records began in 1983, according to LSEG data. The rally has been underpinned by robust investment flows, including heavy retail buying of coins and small bars and sustained inflows into physically backed exchange-traded funds since late 2025.

On the supply side, the market has struggled to respond quickly. Around 20% of annual silver supply typically comes from recycling, but a shortage of high-grade refining capacity has limited how fast scrap can be processed and returned to the market. Precious metals consultancy Metals Focus estimates that this constraint, combined with five consecutive years of structural deficits, has kept available inventories unusually tight.

Although stocks in London vaults recovered to nearly 200 million ounces by end-2025 from record lows earlier in the year, they remain well below levels seen during the 2021 retail-driven rally. In the US, COMEX inventories have fallen sharply in recent months, further highlighting the strain on readily available supplies.

Ponmudi highlighted structural constraints on supply. Primary silver production is largely a by-product of base-metal mining, which limits the industry’s ability to respond quickly to higher prices. “This supply asymmetry is amplifying upside volatility,” Ponmudi said, adding that repeated inventory drawdowns over recent years have significantly reduced above-ground buffers. As a result, even incremental increases in demand are now capable of triggering outsized price moves.

What happens next?

Analysts expect some easing in physical tightness as trade flows normalise, particularly after Washington refrained from imposing new tariffs following its critical metals review in January. This could improve liquidity in traditional markets and temper the pace of gains.

Still, with silver having already priced in a great deal of optimism, many expect profit-taking to emerge. “Profit-taking following the frenzied, investor-driven rally is likely sooner rather than later,” said David Wilson, senior commodities strategist at BNP Paribas, cautioning that any signs of easing in physical markets could trigger sharper pullbacks.

For now, however, silver’s surge above $100 stands as a powerful signal of the intensity of demand coursing through precious metals markets as 2026 gets underway.

(With Reuters inputs)