Silver prices rose on Friday, with XAG/USD trading at $97.83 per troy ounce, a 1.77% increase from the day before. Since the beginning of the year, silver prices have surged by 37.63%. The Gold/Silver ratio, which indicates how many ounces of silver it takes to equal the value of one ounce of gold, fell to 50.16 from 51.15. Silver is a popular choice for those looking to diversify their investments because it serves as a store of value and a medium of exchange.

Factors Influencing Silver Prices

Several factors can affect silver prices, such as geopolitical unrest and economic conditions. Lower interest rates often push prices higher, while a strong US Dollar may have the opposite effect. Other factors include investment demand, silver mining outputs, and recycling rates. Silver is also widely used in industries, especially in electronics and solar energy, due to its excellent conductivity. The demand for silver can be influenced by economic conditions in the US, China, and India. Silver tends to follow gold prices because both are seen as safe investments. The Gold/Silver ratio helps investors assess which metal may be undervalued. With silver already showing an impressive 37% gain early in the year, the trend is clearly upward. This strong momentum makes shorting the metal risky, and call options are likely to be much more expensive. We expect that implied volatility for silver derivatives will stay high, complicating short-volatility strategies. The recent price trends are backed by strong fundamentals. Last year, industrial demand for silver, particularly from the solar and electric vehicle industries, reached a new high, increasing by over 15% globally, according to industry reports. This rise in physical demand, along with major central banks hinting at ending the rate-hiking cycle for 2024-2025, has created a solid support for prices.

Supply and Demand Dynamics

On the supply side, the market has also been a significant factor. The silver market’s structural deficit has widened for the third straight year in 2025, as global mine output increased by less than 2%, failing to meet rising demand. This imbalance suggests that price dips will likely attract strong buying from both industrial users and investors. We should closely monitor the Gold-Silver ratio, which has now reached a multi-year low of 50.16. For most of 2025, this ratio stayed between 75 and 85, meaning silver is now historically expensive compared to gold. This could signal an overextended rally, offering a potential opportunity for pairs traders to consider going long on gold and short on silver as a hedge against a price correction. Create your live VT Markets account and start trading now.

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