There's a lot of talk about the price of gold this year. And for good reason -- the yellow metal soared 65% from the beginning of the year through Oct. 20, its strongest performance in a calendar year since 1979. But, incredibly, another precious metal has had an even more impressive rally this year: Silver climbed 78% through Oct. 20, hitting an all-time high.
Both metals saw a pullback earlier this week as commodities traders took a breather and some profits. Yet funds that provide investors with exposure to physical silver, like the iShares Silver Trust (SLV 4.43%), remain way up for the year. The silver exchange-traded fund (ETF) tracks the silver spot price using silver bullion held in JPMorgan Chase bank vaults in New York and London, and it has soared 65% so far in 2025.
So what are investors to make of all this movement? And does this recent pullback in the silver price provide an opportunity?
NYSEMKT: SLV
Key Data Points
Different dynamics
While both precious metals have had a banner year, the dynamics of the rallies in gold and silver are quite different. Gold is soaring principally because central banks have been on a massive buying spree. That began in 2022 after Russia invaded Ukraine, and the U.S. reacted by freezing Russia's foreign exchange reserves. That prompted many central banks to begin hoarding gold as an alternative to the dollar.
Central banks have purchased more than 1,000 tons of gold each year for the past three years, and it seems that they have no plans to slow their shopping spree. A recent survey by the World Gold Council found that 43% of central banks said they would continue to increase their gold reserves, and 95% believed that overall gold reserves will continue to rise over the next 12 months.
A working precious metal
Silver's story is different. It's on a historic run because it's a critical component in a range of products. It is an excellent conductor so it's used in circuit boards, batteries, solar panels, electric vehicles, and medical devices, among many other products. When the global economy is growing, industrial demand for silver rises and pushes the price higher. In addition, the energy transition to a low-carbon economy requires a lot of silver.
Plus, there's constant global demand for silver to make jewelry, especially in China and India, while mints around the world buy it on a regular basis it to make coins.
Right now, however, there's a supply shortage of silver. They call it a "silver squeeze." Silver inventories in London, the heart of the global silver trade, have fallen by a third since 2021 as global demand for the metal has outpaced output from miners for four years.
The pullback
Early this week the prices of both silver and gold dropped in a steep sell-off. Spot gold prices fell as much as 6.4% and silver dropped a whopping 8.7% before both recovered a bit.
Multiple factors were at play in the sell-off. The dollar strengthened in recent days, and precious metals tend to move in the opposite direction (part of gold's big run-up this year had to do with the slumping greenback). Also, investors took some profits on concerns that the incredible rallies in the two metals were a bit overcooked. And the shutdown of India -- a huge consumer of both gold and silver -- for a national holiday reduced market liquidity.
But the longer-term fundamentals remain in place. Central banks are projected to continue hoarding gold as an alternative to dollars, while global growth and the move to green energy technologies should drive demand for silver higher, as suppliers of the metal struggle to keep up.
If these macro trends continue (as I expect they will), the silver rally has more room to run. A good way to get in on it is the iShares Silver Trust. The ETF has about $26.3 billion in assets under management. And its expense ratio is just 0.5%, which is notably lower than other silver ETFs.