Silver prices rise to nearly 14-year high! Supply and demand imbalance in the spot market intensifies, trade war boosts safe-haven demand
Silver prices have risen to a nearly 14-year high, with supply and demand imbalances in the spot market intensifying and trade wars increasing safe-haven demand. The spot silver price has surpassed $39 per ounce, with a cumulative increase of 35%. Supply tightness and soaring borrowing costs are the main driving factors, with borrowing costs rising above 6%. The U.S. tariff threats against Mexico have also exacerbated the rise in silver prices, as Mexico, a major silver producer, faces a tariff risk of up to 30%. Overall, geopolitical conflicts and industrial demand have driven the increase in silver prices
Silver prices have risen to a nearly fourteen-year high as investors seek alternative precious metal investments against the backdrop of gold prices approaching historical records.
On Monday, spot silver continued last week's 4% gain, rising as much as 1.9% during the day, breaking through $39 per ounce to a nearly fourteen-year high, with a cumulative increase of 35% this year, surpassing gold's 28% rise.
The rise in silver prices is driven by tight supply in the spot market and soaring borrowing costs. The implied annualized cost of borrowing silver for one month has jumped to over 6%, far above the typically near-zero level.
Concerns over U.S. trade policy have also further pushed up silver prices, with Mexico, as the largest silver producer and a key supplier to the U.S. market, facing a tariff threat of up to 30%. Additionally, as a safe-haven asset and industrial metal, silver prices benefit from geopolitical conflicts, trade tensions, and demand from industries such as solar panels.
Imbalance in Supply and Demand in the Spot Market Intensifies
The direct driving force behind the rise in silver prices comes from the tight supply and demand in the spot market.
According to data compiled by Bloomberg, the size of silver-backed ETFs has expanded by about 2,570 tons since February. This silver is locked in ETFs and cannot enter the borrowing or spot trading market.
The borrowing cost of silver for one month has jumped from the usual near-zero level to over 6%, reflecting strong market demand for physical silver. London, as a major global trading center for silver prices, is facing unprecedented supply pressure.
According to data from the Silver Institute, the silver market is heading towards a fifth consecutive year of supply shortages. This structural shortfall provides fundamental support for silver prices.
Trade Policy Uncertainty Boosts Safe-Haven Demand
The threat of trade wars has become an important factor driving up silver prices, with Phillip Nova analyst Priyanka Sachdeva stating:
Silver demand is currently benefiting from the threat of trade wars, as gold prices are too expensive for many investors.
The tariff threat facing Mexico is particularly concerning. According to CCTV News, on July 12 local time, U.S. President Trump announced that starting August 1, 2025, the U.S. will impose a 30% tariff on products imported from Mexico and the European Union.
As the world's largest silver producer, Mexico is a key supplier to the U.S. market. Although the United States-Mexico-Canada Agreement temporarily excludes silver from the tariff list, there are concerns that this exemption may not last.
The spread between London spot prices and New York September futures contracts is unusually wide, similar to the situation earlier this year when Trump's aggressive trade policies prompted a large amount of gold and silver to be shipped from London to the U.S.
Silver-to-Gold Ratio Decline Highlights Investment Opportunities
Despite the significant rise in silver prices, it still holds a historical price advantage relative to gold. Currently, about 86 ounces of silver are needed to purchase 1 ounce of gold, while the 10-year average ratio is 80 The change in this ratio reflects the catching-up rise of silver prices relative to gold. Gold has risen 28% this year, supported by geopolitical conflicts, trade tensions, and central bank purchases. However, the near-historic gold prices have led many investors to turn to relatively cheaper silver prices.
The industrial use of silver also provides additional support. As a key material in the manufacturing of solar panels, silver benefits from the growing global demand for clean energy.
Risk Warning and Disclaimer
The market carries risks, and investments should be made cautiously. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investing based on this is at one's own risk
