The price of silver has more than doubled in 2025 -- rising from about $30 a troy ounce to an all-time closing-day record of $77 on Dec. 26 and an all-time high above $80 in intraday trading.
But Dec. 29 saw a sell-off of the white metal, with the price falling as much as 10% in Monday trading.
That drop in the silver price sent funds like the iShares Silver Trust (SLV 1.83%) tumbling. That fund, which tracks the silver spot price using silver bullion held in JPMorgan Chase bank vaults in New York and London, had climbed as much as 162% during the year, but was down about 8.5% on Monday.
NYSEMKT: SLV
Key Data Points
Market observers attribute the sudden drop to two key factors. One concern among traders is that the price of silver may have risen too rapidly and is becoming a speculative bubble (and that ETFs like the iShares Silver Trust are overbought). Other silver traders sold the precious metal to take profits.
Despite the sell-off, I believe the fundamentals that have sent silver prices soaring in 2025 remain firmly in place.
Silver has significant industrial uses
Like gold, people purchase silver as a hedge against both inflation and recession. But silver has significantly more industrial uses than its yellow counterpart. It's an excellent conductor, so it's become a critical element used in artificial intelligence (AI) data centers and electric vehicles (EVs). It's also used in solar cells, batteries, and antibacterial medical equipment.
"The build-out of AI data centers is intensifying the demand for silver, and so is the ongoing production of EVs (which use more silver than combustion engines)," Yardeni Research said in a recent newsletter.
Image source: Getty Images.
There's also been a silver supply crunch
That's the demand side. However, the supply side of the equation is also extremely bullish for silver, as there has been a shortage of the metal this year. Partly in response to the need for silver and copper in the massive AI data center build-out, this year the U.S. Department of the Interior added silver to its list of critical minerals.
Essentially, silver has become an AI play. And at the moment, both the global AI race and the consequent build-out of AI infrastructure remain at a fever pitch. Analysts gauge AI data center growth by power consumption. Global data center electricity consumption is expected to rise from 2% of global demand today to 9% by 2050.
Annual data center growth reached 19% in 2024, as measured by gigawatts of power demand, up from 8% in 2022. S&P Global expects annual growth of 19% to 21% over the next few years.
The monetary easing cycle is positive for silver prices
Finally, there's the Federal Reserve. Its current easing cycle is also good for silver prices. Looser monetary policy boosts industrial activity and weakens the dollar, which both increases demand for silver as an industrial input and makes it more attractive as a safe-haven investment relative to the greenback.
When precious metals rally, as they are now, the price of silver tends to move more dramatically. That's partly because it's much cheaper than gold -- which at this writing was more than $4,350 an ounce -- so it's much more accessible for retail investors.
As for the iShares Silver Trust, its net assets are around $27 billion, and its holdings consist primarily of physical silver bullion stored in vaults. The fund is managed by investment giant BlackRock.
If you believe -- as I do -- that the Federal Reserve will continue to cut interest rates in 2026, that the AI build-out will continue, and that EVs and renewable energy will also further expand, silver remains a great investment for 2026. The recent drop in prices of ETFs like the iShares Silver Trust presents a nice entry point for beginning a silver investment.
