After hitting an all-time high in January, the price of silver plummeted almost 33% in recent weeks. A historic rally in 2025 sent the price of the white metal from about $31 an ounce in January 2025 to $115 an ounce in January of this year. But silver plummeted back to $77 between Jan. 20 and Feb. 5.
Market analysts attribute the drop to several factors, including a brief move higher for the dollar (precious metals tend to move in the opposite direction of the dollar), weaker demand for silver at the high price level, and concerns about the AI boom, which had helped drive the price higher in recent months.
There has also been a wave of speculative buying of silver in China, which made the price of silver more volatile than usual and set it up for a sudden plunge. Silver's price tends to be more volatile than gold because the market for it is smaller.
Image source: Getty Images.
The price of silver rebounded a bit in recent days and is back above $80 an ounce, but that's still significantly below the recent highs. That raises the question: Is now the time to buy the dip? I believe it is. That's because the fundamentals for a silver rally remain in place despite the recent volatility.
A weaker dollar and lower interest rates should support a silver rally
First, there's the dollar. Its price has been falling steadily over the past year (despite a recent uptick) as the Federal Reserve cut interest rates and the Trump administration made its preference for a weaker dollar quite clear.
That dollar trend, which should push precious metals higher, looks likely to continue. Futures traders are pricing at least two more cuts by the Fed this year, but with Trump's new pick for the Fed likely to take office within months, I think the Fed will cut its target rate more aggressively. Indeed, Fed Chair nominee Kevin Warsh, once a monetary hawk, has been advocating for a steeper rate cut path.
Plus, silver has become an AI play, as it is essential to the massive AI data center buildout. And whatever you might think of AI as an investment, there is no doubt that the spending on data centers will continue through 2025. So-called hyperscalers plan to spend at least $625 billion this year on AI infrastructure.
NYSEMKT: SLV
Key Data Points
If you do plan to invest in silver, the iShares Silver Trust (SLV 1.45%) is a good way to go about it. The fund represents holdings of physical silver stored in vaults by JPMorgan Chase in New York and London. It currently has net assets of about $51 billion.
Despite the plunge of the silver price in recent weeks, SLV is still up nearly 9% so far this year, far outpacing the S&P 500 index. And it's up 158% over the past 52 weeks.
