- Experts say record-high lease rates, record volumes due to tariff concerns, macroeconomic and geopolitical risks, prompt investors to lift allocations to precious metals for portfolio diversification, while shifting silver/gold balance

ISTANBUL

Silver continues to outperform gold, bringing the once-overlooked metal back into the spotlight. Strong industrial demand, heavier investor participation, and price momentum are collectively driving a shift that revives a familiar question: Is silver finally becoming a credible alternative to gold?

Gold continues to be the most widely used safe-haven asset in the world, with central banks holding trillions of dollars in reserves. But according to the current trend, silver is catching up faster.

Over the past 12 months, silver prices have surged 92%, while gold rose roughly 56% during the same period.

In early June, silver reached its highest level in more than 13 years at the time, when it surpassed $35 per ounce to reach around $36.08. Today, silver hit the all-time high of $61.6.

Michael DiRienzo, CEO of Washington-based Silver Institute, told Anadolu that 2025 has been a dramatic year for the silver market, with record metal prices, an unprecedented liquidity squeeze resulting in record-high lease rates, record volumes delivered into CME vaults reflecting tariff concerns in the US, and silver officially designated as a critical mineral by the US government.

"These developments coincide with elevated macroeconomic and geopolitical risks, including US trade policy, prompting investors to lift allocations to precious metals for portfolio diversification. As a result, investment demand has strengthened noticeably," he said.

He explained that the steep rise has been driven largely by investment, with exchange-traded product (ETP) holdings up about 18% through to Nov. 6.

"This reflects investor concerns over stagflation, the Federal Reserve’s independence, government debt sustainability, the US dollar’s role as a safe haven, and geopolitical risks," he stressed.

DiRienzo explained that silver’s exceptional price performance and its favorable supply-demand backdrop have further reinforced investor confidence, with roughly half of silver-backed ETPs being held in London, which contributed to the liquidity squeeze in October.

Michael Hsueh, a precious metals analyst at Deutsche Bank Research, said the net supply-demand balance for silver, after accounting for ETF demand, is now estimated to be the tightest on record when measured as a share of supply.

"When measured as a share of demand, it is similar to 2020. We also observe a rising attribution of that imbalance to ETF demand, and expect that it may be as high next year as it was in 2020," Hsueh said.

He noted that investment demand has risen sharply and is likely to remain strong next year.

Philip Newman, managing director of London-based independent precious metals consultancy Metals Focus, said the US decision to list silver as a critical mineral lacks some details.

"We don't know what that means, so we're still waiting for the US administration to come up with their announcement about what is their response to the decision? What action are they going to take? So that is also adding a little bit of uncertainty," Newman said.

Silver and Fed rate cut expectations

With markets anticipating another 25-basis-point rate cut from the US Federal Reserve on Wednesday, silver and gold prices both hit record highs. Experts argued that lower interest rates are beneficial for the rise in precious metal prices.

They also note that expectations of Fed easing typically boost gold and silver in similar ways.

Hsueh said that, like gold, silver draws a substantial share of demand from investors, and because “gold is positively levered to easier Fed policy,” it follows that silver would likely benefit as well – or be hurt by hawkish surprises.

Newman likewise said the impact on both metals would be "exactly the same."

"We're thinking about not just from the investment, the other dimension for silver is, what does the economy look like, not just in the US, but what are the ripple effects globally?"

He added that a more dovish Fed stance is broadly supportive for both metals, with markets pricing in a quarter-point rate cut.

Silver as an alternative to gold

Silver’s rapid gains relative to gold have revived debate over whether the balance between the two metals is shifting in silver’s favor.

DiRienzo said silver has long been viewed as an alternative to gold, but this year it has outperformed bullion.

He explained that the reasons behind silver's exceptional performance are the rising industrial demand (solar energy, electric vehicles, data centers etc.), and a structural market deficit.

"The paradigm has shifted. Silver has been classified as a critical mineral in the US because of its industrial and defense uses. A new floor has been set for the silver price and investors are eager to own it. We are also in the fifth year of a structural market deficit, and there are very few, if any, signs of mine production increasing to a level that would fill that gap," DiRienzo added.

Hsueh noted that physical silver investment — bars, coins, and medals — is already five times larger than gold when measured in ounces, allowing him to say "yes," silver is already an alternative to gold.

However, Hsueh explained that there is one way in which they can answer "no" to the question, which is that reserve managers by and large have not historically considered silver as deserving an allocation in their long-term holdings.

"I don’t see that changing and we haven’t heard of any reserve managers now making an allocation to silver," he said, adding that it remains difficult to give a definitive "yes" or "no" answer.