Silver's Second Act: Why Recent Market Dynamics May Reprice A Key Commodity

Often stuck in the shadow of gold's prominence, silver recently surpassed the $36 mark; as of June 2025, its highest level in over 13 years. The gold price – which has enjoyed a resurgence – gained only 0.64% on June 11.

It's also noteworthy that, as of June 2025, year-to-date, silver has gained over 23% of market value. This momentum could reflect more than just a happy consequence of a technical breakout – it may suggest deep underlying structural changes. From critical industrial demand to geopolitical repositioning, the case for silver extends beyond the legacy "safe haven" appeal.

Retail interest in reliable, defensive assets appears to be soaring amid broader economic uncertainties. Nevertheless, additional catalysts may be in play, contributing to an intriguing backdrop for the critical commodity.

A Precious Metal With An Industrial Heartbeat

While gold mainly attracts demand for its monetary qualities – particularly as a store of value to hedge against inflation – silver straddles two ecosystems. It, too, acts as a store of value. At the same time, the precious metal is also an industrial workhorse. About 59% of demand for silver stems from industrial sources, which is a figure that is steadily rising. In 2023, this metric was 55%.

From a simplistic standpoint, the answer to the dilemma of rising demand and declining supply is to boost production of the metal. Unfortunately, it's not that simple. Just 72% of silver is mined as a byproduct, meaning that silver production is tethered to the base metals of lead, zinc, copper or other elements.

These base metals feature vastly different supply and demand characteristics relative to silver. Like silver, they're dependent largely on global economic conditions that may not necessarily relate to monetary policy. Subsequently, it's extraordinarily difficult for miners to scale up silver production, irrespective of its pricing dynamics.

Essentially, silver is not the primary money maker of many mining enterprises. Among the 10 largest silver producers, none are principally silver miners. Majority silver mining companies, or "pure-play" silver miners, do exist. Therefore, the supply constraint that's been prevalent in the silver market may not just sustain but exacerbate. The key silver miners, which make up Sprott Silver Miners & Physical Silver ETF SLVR, could be worth watching.

It really comes down to the fact that silver is the most conductive of all metals, which makes it indispensable for the electronics industry, along with myriad other sectors that require the transfer of electric signals. Fundamentally, the key drivers for silver demand are solar panels, semiconductors, electric vehicles, artificial intelligence (due to the necessity of data centers) and 5G infrastructure. These represent robust bull markets, potentially pressuring the available supply of silver.

If the above factors weren't alarming enough, the production volume of silver has decreased by about 4% going back to 2016. Recycling of the metal also remains flat, while ore grades – the concentration of the desired metal within the deposit – continue to decline.

Yet even with these pressures, the silver supply remains inelastic, signaling yet another year of deficit – a condition that has been occurring for six straight years. Many investors in the field reason that because of the inelasticity in supply, demand may correct upward; hence, the heightened interest in silver as opposed to gold.

Silver's Valuation Gap To Gold Steadily Narrowing?

Thanks to broad economic uncertainties that have sparked significant consumer behavioral changes, it seems that many investors saw the writing on the wall and rushed toward an asset with which they were potentially more familiar. Subsequently, gold grabbed headlines earlier this year by hitting all-time highs. However, silver – while rising – trailed gold's accelerative swing, raising questions among people new to the precious metals arena.

As The Wall Street Journal pointed out, silver historically lags gold when the precious metals complex initially enters a bull* market. A big part of this dynamic is the investor response. Monetary concerns – such as rising inflation – tend to drive the gold price. In contrast, silver's demand profile is split between investment interest and industrial usage.

Moreover, industrial demand doesn't always move in sync with gold demand. Therefore, silver falls behind early during rallies impacting the metals sector. However, silver may have a knack for catching up once momentum kicks in.

One of the key metrics that precious metal investors use to gauge relative value is the gold-to-silver ratio; that is, the amount of silver that can be bought with one troy ounce of gold. On average since 1980, the average ratio landed has been 67. Fast forward to the end of the first quarter of this year and the ratio increased substantially to 92. 

Many who follow the precious metals market believe that silver is undervalued relative to gold.  As pointed out in a recent Sprott webcast, what makes this comparison intriguing for speculators is that during the periods that silver's momentum picks up, the historical outperformance compared to gold is about 1.9 times. As such, commodity investors are looking for another strong rally.

Adding to the optimistic narrative of silver is the political realm. Late last year, concerns related to President Donald Trump's anticipated tariffs had fueled short covering, according to the Silver Institute, and deliveries of silver and other precious metals. Fears of higher costs, delivery delays and potential retaliatory measures contributed to a panicked environment. Since short traders didn't want to risk exposure, they began covering their positions – essentially creating a positive feedback loop.

On the world stage, silver has risen in prominence as an alternative safe haven. Perhaps most notably, Kitco news reported Russia's decision to buy silver in its bid to build a precious metals reserve in the next three years may influence other central banks. Meanwhile, institutional money is continuing to flow into both gold and silver, providing support for the metals complex.

In our view, the latest demand spike for silver isn't just based on technical noise; rather, a structural demand shift may be occurring. Throughout this transition, industrial demand continues to accelerate, worsening the existing supply deficit. As such, many investors in the space are convinced that the silver price may correct upward to reflect current realities.

Delivering Silver Exposure 

For investors seeking focused exposure to the silver market without having to buy bullion or parse through individual equities, the Sprott Silver Miners & Physical Silver ETF SLVR is a distinctive vehicle. What sets SLVR apart is its bifurcated strategy: it combines direct exposure to physical silver with holdings in publicly traded silver mining companies that meet stringent silver exposure criteria.

Unlike broader funds that might lump in diversified miners or firms tangentially tied to the silver supply chain, SLVR adheres to a "pure-play" methodology. The ETF's majority allocation is to companies that must derive at least 15% of their revenue or asset base directly from silver production. This threshold limits dilution from non-correlated operations, allowing SLVR to maintain tighter alignment with silver price movements.

Moreover, the fund includes a fixed allocation to physical silver, rebalanced semiannually, adding an anchor of tangible exposure to its profile. As a result, SLVR isn't just a proxy for mining stocks – it's a hybrid strategy designed to benefit from both operational leverage and physical asset appreciation.

Because the silver mining space is relatively small and heavily weighted toward mid- and small-capitalization firms, SLVR also opens the door to a slice of the market which can be often overlooked. For investors anticipating a structural shift in silver pricing, this dual-exposure format may offer an intriguing blend of upside potential and strategic discipline.

A New Chapter In The Silver Narrative

As it stands, it appears silver's recent surge isn't just a reaction to market momentum – it reflects deeper macro and structural undercurrents. From rising industrial applications tied to electrification and advanced technologies to geopolitical hedging and persistent supply deficits, the metal is carving out a more assertive role in the modern economic landscape. While gold continues to command the spotlight, silver is rapidly positioning itself as a dual-purpose asset: part ‘precious' hedge, part industrial necessity.

As global uncertainties persist and the energy transition accelerates, the investment case for silver is shifting to a strategic framework. The narrowing gold-to-silver ratio, central bank diversification moves and tariff-related disruptions add urgency to the narrative. For those seeking targeted exposure to this evolving story, vehicles like SLVR can offer a disciplined approach to participate in both the physical and equity sides of the silver market and are worth a closer look.

In the end, silver may no longer be just the shadow of gold. Instead, it's emerging as a vital and dynamic force in its own right – one that investors may want to keep on their radar.

*A bull market is one in which prices are expected to rise.

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