Silver is getting massively expensive, following the trends of gold. What are the reasons and what effects will it have
The price of silver hit a record high ahead of an expected interest rate cut by the US Federal Reserve and as technology industry demand for the precious metal remains strong.
The price of silver has reached a record high. Photo by Shutterstock
Silver broke above $60 (£45.10) an ounce for the first time on Tuesday in the spot market, where the precious metal is bought and sold for immediate delivery.
Gold, which hit record highs earlier this year amid rising concerns about the impact of US tariffs and the global economic outlook, also rose this week, according to the BBC.
Investors tend to put money into precious metals like gold and silver as interest rates fall and the US dollar depreciates.
The US central bank is expected to cut its key interest rate by a quarter of a percentage point on Wednesday.
“When interest rates are low, traders typically buy assets like silver because the benefits of keeping cash in the bank or buying short-term bonds decrease,” said Yeow Hee Chua of Nanyang Technological University.
“This naturally shifts demand to assets considered stores of value, including silverhe said.
The move to so-called “safe haven” assets has also been a key reason why gold has hit new highs in recent months, surpassing $4,000 an ounce for the first time.
The rise in the price of silver could also be seen as a “spillover effect” of rising gold prices as investors look for cheaper alternatives, said OCBC bank analyst Christopher Wong.
Gold is up more than 50% this year, partly due to major purchases by central banks. The price of platinum and palladium has also risen this year.
Demand exceeds supply
Experts say the value of silver was also pushed higher as strong demand from the tech industry outstripped supply.
That has helped silver's value more than double this year as it has outperformed other precious metals, including gold.
“Silver is not only an investment asset, but also a physical resource”and more and more manufacturers need this material, said Kosmas Marinakis from the Singapore Management University.
The precious metal, which conducts electricity better than gold or copper, is used to make goods such as electric vehicles (EVs) and solar panels.
Experts predict that growing sales of electric vehicles will further boost demand for silver, while advanced car batteries will demand even more of the metal.
But it is difficult to increase the supply of silver quickly because most of the global production is a byproduct of mines that mainly extract other metals such as lead, copper or gold.
The price of silver is also being boosted by concerns that the US may impose tariffs on it as part of President Donald Trump's trade policies.
Fears of potential tariffs have also led to silver hoarding in the US, leading to shortages in other parts of the world.
The US imports about two-thirds of its silver, which is used for manufacturing as well as jewelry and investment.
Producers have been racing to secure supplies to ensure their operations are not disrupted by shortages, which has helped push up prices on global markets, Professor Marinakis said.
He added that he expects the price of silver to remain elevated in the coming months.
