This year, the performance of the precious metals market has been remarkable. As of October 20th, the price of gold has surged by a cumulative 65%, marking its highest annual gain since 1979. However, silver’s performance has been even more astounding, with its price skyrocketing by 78% over the same period, setting a new historical record. Although prices for both gold and silver experienced a pullback earlier this week as commodity traders took profits, funds like the iShares Silver Trust (SLV), which provides exposure to physical silver, have remained elevated. This silver exchange-traded fund holds silver in JPMorgan’s vaults in New York and London to track the spot price, and its price has accumulated a 65% gain as of 2025. Faced with such volatility, investors are left wondering: does the recent pullback signal a new investment opportunity?
Although both gold and silver are precious metals, the driving forces behind their price increases are distinctly different. Gold’s surge is primarily fueled by large-scale purchasing by central banks worldwide. This trend began after Russia’s invasion of Ukraine in 2022, when the US froze Russian foreign exchange reserves, prompting many central banks to increase their gold holdings as an alternative to US dollar assets. Over the past three years, central bank gold purchases have exceeded 1,000 tons annually, showing no signs of slowing down. The latest survey from the World Gold Council reveals that 43% of central banks plan to continue increasing their gold reserves, and 95% of central banks expect the total global gold reserves to rise further in the next 12 months.
Silver is in a historic uptrend, with its momentum stemming more from robust demand in the industrial sector. As an excellent conductor, silver is widely used in products like circuit boards, batteries, solar panels, electric vehicles, and medical devices. With global economic growth and the accelerating energy transition, industrial demand for silver continues to climb. Additionally, silver is in high demand for jewelry manufacturing and coin minting, particularly in markets like China and India. However, the supply side is facing a “silver squeeze”: global silver demand has exceeded mine production for four consecutive years, and silver inventories in London, a major trading hub, have fallen by one-third since 2021. This supply-demand imbalance is further driving up prices.
Earlier this week, spot gold prices fell by as much as 6.4%, and silver dropped by up to 8.7%, before both rebounded. This pullback was influenced by multiple factors: the recent strength of the US dollar put pressure on precious metals, as their movements are often inversely correlated; investors took profits from the previous rapid gains; concurrently, market liquidity was reduced due to India’s market closure for a national holiday. Despite this, the long-term fundamentals for both gold and silver remain solid. Central banks are expected to continue increasing their gold holdings, while global economic growth and the transition to green technologies will continue to drive silver demand, and the supply side is unlikely to catch up quickly.
If these macro trends persist, there is still ample room for silver prices to rise. For investors looking to gain exposure to the silver market, the iShares Silver Trust is a convenient option. The fund has assets under management of approximately $26.3 billion and an expense ratio of just 0.5%, which is lower than similar products.
