Insights 
VT 
Silver as a Store of Value and Medium of Exchange
Factors affecting silver prices include geopolitical instability, interest rates, and currency strength. Silver’s industrial use in electronics and solar energy impacts its demand and price.
Silver closely follows gold price movements due to their similar safe-haven status. The Gold/Silver ratio can assist in evaluating the relative value between silver and gold, potential indicators of silver being undervalued or gold overvalued. Conversely, a lower ratio might indicate that gold is undervalued compared to silver.
Given the minor dip in silver to $52.89 an ounce, we should see this as a potential pause rather than a reversal. The price has surged an incredible 83% since the start of 2025, so some profit-taking is completely normal. The underlying bullish trend remains very strong, supported by fundamental economic shifts we’ve seen this year.
Impact of Federal Reserve Rate Cuts
The aggressive rate cuts by the Federal Reserve earlier this year, totaling 75 basis points in response to slowing economic data, have significantly weakened the US Dollar. A weaker dollar makes silver cheaper for foreign buyers, and lower interest rates increase the appeal of non-yielding assets like precious metals. This monetary easing has been the primary fuel for the rally we’ve experienced since the spring.
Industrial demand continues to provide a solid price floor, especially from the renewable energy sector. Recent reports from the third quarter showed silver demand for photovoltaics is on track to exceed 260 million ounces this year, a new record driven by global clean energy initiatives. Looking back, this is a dramatic increase from the roughly 161 million ounces used in the solar industry back in 2023, showing how critical this demand has become.
The Gold/Silver ratio has crept up to nearly 80, meaning it takes almost 80 ounces of silver to buy one ounce of gold. Historically, this ratio has averaged closer to 65-70, suggesting that even after its massive run, silver may still be undervalued compared to gold. This widening gap often precedes a period where silver outperforms gold, a signal many traders are watching closely.
For traders using derivatives, this small pullback could be an opportunity to enter new long positions or add to existing ones. Buying call options could be a way to bet on the price moving higher while limiting downside risk, which is important after such a rapid price increase. A pairs trade, going long on silver futures while shorting gold futures, could be a strategic way to play a potential compression of the Gold/Silver ratio in the weeks ahead.
