According to FXStreet, silver prices (XAG/USD) rose to $95.45 per troy ounce on Tuesday, up 1.14% from Monday’s price of $94.38. Since the beginning of the year, silver prices have increased by 34.28%. The gold/silver ratio was 49.54 on Tuesday, a slight increase from 49.50 on Monday. Many investors choose silver for portfolio diversification because of its intrinsic value and potential as a hedge during periods of high inflation. People can invest in silver physically or through investment options like Exchange Traded Funds (ETFs).

Factors Influencing Silver Prices

Several factors can affect silver prices. These include geopolitical instability, fears of recession, and interest rates. A strong U.S. dollar usually limits silver’s price, while a weaker dollar tends to boost it. Investment demand, mining supply, and recycling rates also play a critical role in pricing. Silver is essential in industries like electronics and solar energy because of its high electrical conductivity. Shifts in industrial demand or consumer preferences in countries like the U.S., China, and India can lead to price changes in silver. Silver prices often follow gold’s trends since both metals are viewed as safe-haven assets. The gold/silver ratio helps to evaluate the value relationship between the two. With silver now trading over $95 an ounce, we are experiencing significant price volatility, continuing last year’s strong trend. The impressive 34% rally in just the first three weeks of 2026 indicates that momentum is still robust. Traders should prepare for substantial daily price fluctuations and quick movements in either direction.

Silver Market Structural Deficit

A major factor driving silver prices is the structural deficit in the silver market, which intensified throughout 2025. Data from the World Silver Council’s Q4 2025 report showed that industrial demand—especially for solar panels and electric vehicles—outpaced mining supply by over 200 million ounces for the third consecutive year. This high industrial consumption is a key reason silver has outperformed gold significantly. This price increase has also been supported by monetary policy changes, particularly the Federal Reserve’s shift observed in November 2025, when they reduced rates even though core inflation was above 3.5%. This decision weakened the U.S. dollar and signaled to the market that the Fed prioritized slowing economic growth over fighting inflation. As long as real interest rates remain negative, investment will likely continue flowing into tangible assets like silver. The gold/silver ratio, now under 50, is at its lowest in several decades, contrasting sharply with the 80-to-1 levels seen in 2023. This suggests that silver’s industrial use has enhanced its value beyond its traditional monetary relationship with gold. While some may argue that silver is overvalued, the supply-demand fundamentals indicate that this lower ratio may continue. Given this dramatic price increase, holding long positions in silver involves a significant risk of a sharp price correction. We believe using derivatives to manage risk is a wise strategy. Long call spreads can capture further upside while limiting downside risk. Alternatively, purchasing puts can serve as a cost-effective hedge against a potential correction if industrial demand unexpectedly drops. Create your live VT Markets account and start trading now.

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