Silver’s Record Rally Draws Focus to Tight Supply and Industrial Demand
Why Silver Prices Are Soaring | CNBC
Silver surged to record highs, and Rhona O’Connell, Head of Market Analysis, EMEA and Asia at StoneX, joined CNBC to discuss the run. Among other factors, she noted the rally reflected severe tightness in the physical market, saying there was little unallocated silver left in London, a condition that coincided with extreme stress in borrowing markets.
Key Takeaways
- StoneX's O’Connell says tight supply and strong industrial use helped lift silver to record highs
- Tight markets are stressing even more over India’s heavy buying and U.S. tariff uncertainty
- Heavy EV and AI demand could exacerbate structural supply deficits
Risk Managers Holding Inventory
O’Connell noted that silver traded in a narrow band near $30 to $35 early in 2025. That changed, though, when U.S. tariffs created fear that metal shipped out of the country might return at far higher cost. Many risk managers chose to hold inventory. This limited supply to global buyers and increased stress in the wholesale market.
London vault stocks had already dropped by about a third since 2022. O’Connell said that the visible tonnage overstated what was truly available because large portions were allocated to ETFs, not part of the free float.
India’s Seasonal Demand Added Momentum
India is the world’s largest silver consumer. A strong monsoon and good harvest left farmers with more disposable income. O’Connell said this drove a surge in silver buying as households prepared for Diwali, a time when demand for precious metals rises. Heavy consumption quickly tightened supplies at Indian refineries, raising local prices to record levels.
Industrial Demand and the Return of Deficits
O’Connell further remarked the silver market has shifted from surplus into deficit over the past year. Industrial demand continues to rise due to solar power, EV manufacturing and AI-related electronics. She pointed to silver’s high thermal and electrical conductivity as a key reason for its widespread industrial use.
Mine supply is not keeping pace. Only about 28% of global output comes from primary silver mines. The rest depends on the economics of copper, zinc, lead and gold. O’Connell said this makes the market more sensitive to swings in base-metal production.
Looking ahead, O'Connell cautions that silver’s sharp moves tend to reverse fast. Silver is, in her words the “Cinderella” metal that can gain sudden attention, then just as quickly fall when that attention fades. While structural demand is rising, O’Connell warned that silver’s history suggests any pullback could be sharp.
Dive Deeper
Explore Rhona O’Connell’s regular precious-metals analysis in Market Intelligence, included in the StoneX Essential Bundle.
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Author: Andy Castimanes
Expert: Rhona O’Connell
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