(Kitco News) - Ongoing supply chain issues and renewed expectations that the Federal Reserve will cut interest rates next month have driven silver prices to record highs, adding momentum to gold’s rally as prices trade at a two-week high.
The silver market has been attracting significant attention in recent months as growing investment demand has depleted above-ground stockpiles. Last month, supply chain issues significantly reduced the physical silver available in London’s over-the-counter markets.
Demand has now shifted to China as reserves on the Shanghai Gold Exchange (SGE) have fallen to their lowest level in a decade. Meanwhile, concerns that silver will face tariffs as a newly listed critical metal are keeping U.S. stockpiles elevated.
Analysts note that rising investment demand is exacerbating marketplace dynamics as the global silver supply remains in deficit through 2026, with industrial consumption outstripping supply.
Silver prices last traded at $55.33 an ounce, up nearly 6% on the day. The precious metal is up 12% on the week, marking its best gains since early August 2020.
Renewed demand for silver is causing the gray metal to outperform gold, with the gold/silver ratio currently trading at 74.75 points, its lowest level since early May 2024.
Silver’s new momentum is generating fresh confidence in the precious metals complex as gold has pushed above initial resistance at $4,200 an ounce, prompting some analysts to speculate that the weeks-long consolidation period has ended.
“We have seen a pretty chunky move higher today, and it does feel as if bullion is starting to work on a breakout, arguably getting a helpful tailwind from the bid that we’ve seen come in to silver, which has propelled that to a record high,” said Michael Brown, Senior Market Analyst at Pepperstone. “A close north of the 4,200 mark would clearly get the bulls excited into next week, and perhaps also spur a round of further buying when trading conditions improve, and volume rises, after the end of the Thanksgiving holidays.”
“I think the latest leg higher is a combination of retail demand remaining very healthy indeed, coupled with physical demand from reserve allocators and still being substantial too,” he added. “My overall bias remains a bullish one, with the path of least resistance continuing to lead to the upside.”
Some analysts note that the rallies in gold and silver remain well supported as markets begin to reprice interest rate cuts expected next month. Both precious metals consolidated through November as markets reacted to comments from Federal Reserve Chair Jerome Powell, who said that a December rate cut was not a foregone conclusion.
However, analysts said that slowing momentum in private-sector employment and limited government data—showing lackluster economic activity and muted inflation—are once again driving rate-cut expectations.
According to the CME FedWatch Tool, markets see more than an 85% chance of lower interest rates next month.
“What’s not to like about the outlook,” said Ole Hansen, Head of Commodity Strategy at Saxo Bank. “Rate cuts are inbound, especially next year when Trump gains better control of the FOMC, thereby raising concerns about its independence. The debt creation continues at a worrying rate. Adding to this, central bank demand and the crypto industry buying gold it's difficult not to see further upside. I personally would have thought the consolidation phase would have lasted into next year,but silver and platinum both ruined that plan.”
Thorsten Polleit, President of the Ludwig von Mises Institute, said that the growing threat of slowing economic activity will force the Federal Reserve to cut interest rates next month and through 2026. He added that this outlook will continue to support gold’s stable long-term bull rally.
“Because there is so much uncertainty, I expect that the Federal Reserve will yield to increased political pressure and the underlying trend in bond yields will be lower,” Polleit said. “$5,000 remains a very real target in the not-too-distant future. This is a train that won’t be stopped.”
Although the U.S. government has resumed operations, economic data remains limited. The government has already said it won’t release October’s nonfarm payrolls or third-quarter GDP. However, private payroll processor ADP will release its November private-sector employment data.
Markets will also pay attention to manufacturing and service-sector data from the Institute for Supply Management.
The week ends with preliminary University of Michigan Consumer Sentiment data and inflation numbers.
Economic data to watch next week:
Monday: ISM Manufacturing PMI
Wednesday: ADP employment data, ISM Services PMI
Thursday: US weekly jobless claims
Friday: Core PCE, University of Michigan preliminary Consumer Sentiment Survey
