Silver has surged above $60 per ounce, setting a new record. This increase is driven by expectations of Federal Reserve interest rate cuts and concerns about reduced supply. Historically, silver performs better than gold when interest rates drop, which has fueled its rise. Prices for silver have jumped over 110% this year, outpacing gold’s gains. The market is responding to potential future U.S. tariffs on silver after it was labeled a critical mineral by the Geological Survey. The amount of silver mined has decreased by about 3% this year. This drop is due to declining ore grades and a lack of new mining projects. Looking ahead to 2026, silver prices are expected to remain strong because of high industrial demand, limited supply growth, and a better economic environment. Silver has recently cracked the $60 per ounce mark, a significant milestone fueled by tight supply and the anticipation of Federal Reserve rate cuts. This upward momentum has been building throughout the year, with silver up over 110% since January 2025. Traders focusing on derivatives should take note of this strong trend. With the upcoming Federal Open Market Committee (FOMC) meeting next week, it would be wise to prepare for further price increases by considering call options. The CME FedWatch Tool indicates that markets expect over a 90% chance of an initial rate cut, which tends to benefit silver more than gold. A similar pattern happened during the 2019 easing cycle, where silver prices rose rapidly after the Fed’s first cut. However, given the large gains this year, we should be cautious about a possible short-term drop. The CBOE Silver Volatility Index (VXSLV) has reached multi-year highs, making long call options costly. Instead, traders might think about selling out-of-the-money put options to take advantage of high premiums, betting that any fall in price will be slight. We are also keeping an eye on supply factors, which suggest support for prices going into 2026. Recent Q3 2025 production reports from major mining companies show a trend of declining ore grades. The designation of silver as a critical mineral in the U.S. raises the chance of future tariffs. This supply shortage indicates that maintaining longer-term bullish positions could be a rewarding strategy.

here to set up a live account on VT Markets now