Silver smashes through US$80 for the first time in historic year-end rally

SINGAPORE - Silver smashed through US$80 an ounce to an all-time high, extending a breakneck end-of-year rally powered by speculative trades and a persistent mismatch between supply and demand.

The white metal spiked as much as 6 per cent on a roller-coaster ride that took it to US$84 an ounce early on Dec 29, then sent it plunging below the previous close, before it recovered. A weaker US dollar and escalating geopolitical tensions have added to the appeal of precious metals during a bull run that has also taken gold and platinum to all-time peaks.

The rally on Dec 29 came after a comment by billionaire Elon Musk over the weekend that highlighted the growing investor frenzy around precious metals. Mr Musk replied to a tweet on Chinese export restrictions by saying on X: “This is not good. Silver is needed in many industrial processes.”

The Chinese measures are effectively a roll-over of previous policies and were first announced by the Ministry of Commerce on Oct 30. Though China ranks among the top three global producers of silver – largely as a by-product of industrial metals – it is also the world’s largest consumer, and therefore not a major exporter.

“The speculative atmosphere is very strong,” said China Futures analyst Wang Yanqing, adding that any discussion on moves by Beijing to tighten exports was groundless. “There’s hype around tight spot supply, and it’s a bit extreme now.”

Silver’s acceleration – it has gained more than 40 per cent in December and is tracking for its best annual performance in records since 1951 – caps a year-long rally for precious metals.

The gains have been driven by elevated central bank purchases, inflows to exchange-traded funds and three successive interest rate cuts by the US Federal Reserve. Lower borrowing costs are a tailwind for the commodities, which do not pay interest, and traders are betting on more rate cuts in 2026.

“Make no mistake: We are witnessing a generational bubble playing out in silver,” said Mr Tony Sycamore, a market analyst at IG Australia. “With new mines taking up to 10 years to develop and capital being drawn into the precious metals bubble like a moth to a flame, it is impossible to say when the air might come out.”

In the last week, frictions in Venezuela – where the US has blockaded oil tankers – and strikes by Washington on militant group ISIS in Nigeria have added to the haven appeal of precious metals. The Bloomberg Dollar Spot Index, a key gauge of the US currency’s strength, fell 0.8 per cent last week, its biggest weekly drop since June. A weaker dollar is generally supportive of gold and silver.

Spot silver was up 1.2 per cent at US$80.24 an ounce as of midday in Singapore. Gold edged down 0.4 per cent to US$4,515.20, below a record of US$4,549.92 hit on Dec 26. Platinum and palladium both retreated – the latter by more than 6 per cent – after hitting record highs in the previous session.

Silver is outshining gold for several reasons

. For one thing, the market is thinner – tighter inventories and liquidity that can evaporate quickly. While the London gold market is underpinned by around US$700 billion (S$899 billion) of bullion that can be lent out in the event of a liquidity squeeze, no such reserve exists for silver. That historic supply squeeze happened in October.

Vaults in London have drawn sizeable inflows since the October squeeze, but this has led to shortages elsewhere. In China, silver kept in warehouses linked to the Shanghai Futures Exchange in November hit the lowest level since 2015.

Added to that, much of the world’s readily available silver remains in New York as traders await the outcome of a US Commerce Department probe into whether imports of critical minerals pose a national security risk. The review could pave the way for tariffs or other trade curbs on the metal.

Unlike gold, silver also has many useful real-world properties that make it a valuable component in a range of products like solar panels, artificial intelligence data centres and electronics. With inventories near their lowest on record, there is a risk of supply shortages that could impact multiple industries.

“The dominant driver of late has been a severe structural supply-demand imbalance in silver, sparking a scramble for physical metal,” Mr Sycamore said. “Buyers are now paying a remarkable 7 per cent premium for immediate delivery compared to waiting a year.”

Technical indicators show the rally in silver may have run too hard, too fast. The metal’s 14-day relative strength index showed a reading of almost 80, far above the 70 that is considered to be overbought. BLOOMBERG