Silver Soars Past $60 an Ounce — What’s Driving the Historic Rally

Silver climbed to an unprecedented peak after markets digested dwindling inventories, strong inflows into silver-backed funds and growing expectations the Federal Reserve will loosen policy, creating a potent cocktail that has driven prices sharply higher.

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Silver bars

Supply Shortages and Falling Inventories Tighten the Physical Market

Traders and analysts point to an acute shortfall of physical silver as the primary immediate driver behind the rally. Deliveries into major storage hubs slowed while demand for metal from fabricators, hedge funds and bullion-backed exchange-traded funds surged, leaving available stocks thin.

Inventories in key locations have fallen to multi-year lows: Chinese warehouse holdings dropped to levels not seen in a decade, and withdrawals from London vaults outpaced replenishment. That mismatch between available metal and rising demand amplified price moves and made the market highly sensitive to any fresh flows.

ETF Inflows, Speculative Demand and Interest-Rate Expectations Fuel the Rally

Investment flows accelerated as traders positioned for a monetary-policy pivot. Large capital inflows into silver ETFs created an additional layer of demand that pushed market participants to chase physical metal. Recent data showed one of the biggest weekly inflows into silver-backed funds since mid-year, underscoring investor appetite for the metal as a hedge.

Expectations that the Federal Reserve could cut interest rates at its December meeting added fuel to the move. Lower real rates typically increase the appeal of non-yielding assets such as precious metals, and traders priced this scenario aggressively, compressing the cost of holding bullion relative to cash instruments.

Market observers describe the current environment as a rare convergence: constrained supply, rising ETF demand and a policy backdrop that favors precious metals, all acting together to push silver higher.

Geopolitics, Borrowing Costs and Market Structure

Beyond pure supply-demand arithmetic, regulators' focus on certain minerals and the potential for trade measures have also shaped flows. Silver's recent designation in some policy lists as a strategically important mineral raised the prospect of tighter domestic controls, nudging investors to accumulate physical metal.

At the same time, borrowing costs for silver — the price to lease bullion — remain elevated in several centres, signaling tightness in the physical marketplace and making short positions more costly to maintain. Meanwhile, speculative activity on derivatives venues magnified price swings, increasing intraday volatility.

Outlook: Why Volatility May Persist

Analysts caution that the rally could continue so long as inventories stay low and rate-cut expectations remain intact. However, silver's dramatic advance also opens the door to sharp pullbacks if any of those assumptions shift — for example, if the Federal Reserve signals a more cautious path on cuts, or if large bars re-enter the market.

Investors should expect heightened swings: silver historically shows amplified moves both up and down during periods of macroeconomic uncertainty and rapid capital rotation into and out of ETFs. For those considering exposure, the metal offers both hedging appeal and substantial short-term risk.

Data point: On Wednesday the metal gained roughly 1.3% and touched a session peak near $61.48 per ounce — its highest level on record — after a sustained run of buying across physical and paper markets.

As the market reacts to central-bank signals and evolving inventory flows, traders and long-term buyers alike will watch storage statistics, ETF flows and policy comments closely — each can trigger outsized moves in either direction.