Why Silver Beat Gold and the S&P in 2025-And What Comes Next

While the financial world has been captivated by the volatility of cryptocurrency and the steady march of gold, a different asset has quietly taken the lead in 2025. Silver, often dismissed as the volatile younger sibling in the precious metals family, is beginning to shed its reputation as the poor man’s gold.

Year-to-date (YTD), silver has posted gains of approximately 95%, significantly outpacing gold’s respectable 60% rise and crushing the broader returns of the S&P 500. A rare convergence of events is driving this performance: aggressive industrial demand, shrinking global inventories, and shifts in monetary policy.

For equity investors, the iShares Silver Trust (NYSEARCA: SLV) has become the primary vehicle to participate in this rally. Closing around $51 at the end of November, iShares Silver Trust has effectively tracked the metal’s ascent, offering a liquid entry point into a physical market that is becoming increasingly difficult to navigate.

The Thanksgiving Squeeze: A Wake-Up Call for Markets

The fragility of the global silver market was on full display at the end of November. A cooling system failure at a CyrusOne data center disrupted operations at the Chicago Mercantile Exchange (CME), causing a ten-hour trading halt on the Comex silver futures market. 

When electronic trading screens went dark, physical hubs in London and Shanghai took over. Spot prices spiked to a record $56.72 per ounce, showing that real, deliverable silver is in critically short supply.

This event serves as a critical proof of concept for the bullish thesis on silver.

In modern financial markets, the price of commodities is often set by paper derivatives, contracts that represent metal but are rarely exchanged for the actual product.

When one such paper market paused, the physical market reasserted itself, revealing that real, deliverable silver is in short supply.

For holders of the iShares Silver Trust, which is backed by allocated bullion held in vaults, this disconnect highlights the value of holding assets tied to physical metal. The outage underscored that when liquidity dries up, the premium on physical ownership expands rapidly.

Solar Power and the End of Thrifting

Behind the headline-grabbing price spikes lies a boring but powerful reality—the world is using more silver than miners can dig out of the ground. 2026 is on track to mark the fifth consecutive year of a structural supply deficit, with the Silver Institute projecting a shortfall of nearly 95 million ounces. This brings the cumulative deficit since 2021 to approximately 820 million ounces, roughly equivalent to an entire year of global mine production.

Historically, when silver prices rise, industrial manufacturers try to thrift, or reduce the amount of silver used in their products to save money. However, a major technological shift in the solar industry is neutralizing this risk.

Manufacturers are aggressively transitioning from older solar cell technology (PERC) to newer, more efficient designs known as TOPCon and Heterojunction (HJT) cells. While older cells used about 10 milligrams of silver per watt, these new high-efficiency cells require between 13 and 22 milligrams per watt.

This shift creates a situation in which the solar industry requires more silver even as prices rise. With inventories in Shanghai warehouses at decade lows, there is very little buffer to absorb the increasing industrial consumption.

How SLV Tracks 500 Million Ounces

For investors seeking direct exposure to the silver price without the logistical headaches of storing physical bars, the iShares Silver Trust remains the market's heavyweight vehicle. Unlike mining companies, which face operational risks such as labor strikes or rising fuel costs, iShares Silver Trust is a passive grantor trust. Its sole purpose is to track the spot price of silver bullion, less the trust’s expenses.

Fundamentally, iShares Silver Trust is a titan in the commodity space. As of November 2025, the trust manages approximately $27 billion in assets, backed by a staggering 501.9 million ounces of silver held in allocated vaults in London and New York. To put this scale into perspective, iShares Silver Trust’s holdings represent roughly 60% of an entire year's worth of global mine production, effectively making the ETF a strategic stockpile in its own right.

The fund’s structure makes it a critical gauge for institutional sentiment. Recent data shows short interest in iShares Silver Trust hovering around 9.63% of the float. In a rising market, this relatively high short interest can act as rocket fuel; as prices break resistance levels (like the recent move above $50), short sellers are forced to buy shares to cover their positions, creating a feedback loop that drives the share price even higher.

With an expense ratio of 0.50%, iShares Silver Trust provides a cost-effective alternative to physical ownership, which often incurs higher premiums and storage fees. For the fundamental investor, iShares Silver Trust offers the purest correlation to the metal's supply-demand dynamics, serving as a liquid proxy for the physical shortage unfolding globally.

Rates, Ratios, and Critical Minerals

Beyond supply and demand, the macroeconomic environment is providing a strong tailwind for precious metals. All eyes are now on the Federal Reserve’s upcoming meeting on Dec. 9-10. Markets are currently pricing in an 85% probability of an interest rate cut.

Lower interest rates typically weaken the U.S. dollar, making commodities like silver cheaper for international buyers and increasing global demand.

Furthermore, silver remains statistically undervalued compared to gold. The Gold/Silver Ratio, which measures how many ounces of silver it takes to buy one ounce of gold, currently sits near 77. Historically, its average is closer to 60. For the ratio to return to its norm, silver would need to outperform gold by a significant margin from current levels.

Perhaps the most significant long-term driver is the shifting U.S. trade policy. The government officially designated silver as a Critical Mineral in late 2025. Following this, new investigations under Section 232 of the Trade Expansion Act have raised fears of future tariffs on imported metals.

The United States imports roughly 64% of the silver it consumes. The threat of tariffs has triggered precautionary buying, with approximately 75 million ounces flowing into U.S. vaults since October. This political maneuvering effectively puts a floor under the price, as strategic stockpiling competes with industrial buyers for the limited supply.

Volatility, Opportunity, and the New Normal

The recent surge in silver prices is not a momentary glitch; it is the result of years of underinvestment in mining colliding with an explosion in industrial demand. While the rapid rise to record highs may lead to short-term volatility as traders take profits, the floor for silver prices has likely moved higher.

The combination of critically low inventories, the shift toward silver-intensive solar technologies, and a supportive Federal Reserve suggests that the poor man's gold has entered a new era. With the designation of Critical Mineral status driving strategic stockpiling, fundamentals point to a structural bull market that is only just beginning to emerge.

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The article "Why Silver Beat Gold and the S&P in 2025—And What Comes Next" first appeared on MarketBeat.