It’s customary in India to buy gold or silver during a festive time like Diwali. But look around and you will instantly realise that silver and gold prices are shattering new records.
Yes, demand is pushing up prices but it’s a complex combination of multiple factors as we explain here in simple terms. Silver prices have shot up and on October 15, 2025 silver was trading at ₹1,89,100 per kilogram.
Why are silver prices surging?
The surge in silver prices is driven by a mix of severe supply shortages, strong industrial demand, and speculative buying. In London, where much of the global silver trade is settled, inventories have fallen to historic lows, forcing traders to pay steep premiums, borrow metal at high ‘lease rates,’ or even fly silver bars by air to meet delivery. Some reports suggest borrowing costs (lease rates) have jumped above 30-40%, reflecting just how tight physical silver has become.
Part of the reason for this scarcity is that silver is often produced as a byproduct of mining other metals (like copper, lead, and zinc). This means that when prices of those primary metals are weak or mines reduce output, silver production also suffers, no matter what the demand for silver is then.
Silver shines not just in jewellery but in green tech too
Meanwhile, demand is exploding, not just from investors seeking a safe haven, but also from industrial users, especially in green technologies. Silver is essential in solar panels, electronics, electric vehicles, and 5G infrastructure. As countries push harder on renewable energy and clean tech, silver’s industrial role becomes more important.
Investors are piling in, too. Interest in silver-backed exchange traded funds or ETFs and other investment vehicles has soared, further tightening supply. In some markets (notably India), ETFs are trading at premiums of 10-15% above spot silver prices, because funds struggle to obtain the physical metal needed to back holdings.
Word of caution on silver from analysts
That said, many analysts caution that silver carries more risk and volatility than gold. Because silver’s market is smaller and more influenced by industrial demand, price swings are likely to be sharper. Some economists suggest that upside may be strong, but downside risk is also significant if supply or demand dynamics change.
Banks are bullish for now. For example, Bank of America sees silver reaching $65 per ounce in 2026, based on continuing supply stress and industrial demand. But others warn that if interest rates rise unexpectedly, or if industrial demand slows, silver could see steep corrections.
In short: the perfect storm of constrained supply, booming industrial use, and aggressive investor demand is pushing silver into uncharted territory. But with that comes risk, and while the gains are tempting, the ride may get bumpy.
(Image AI Generated)