Soaring silver: Stay sober or keep running?

With a year-to-date surge of over 121%, far outpacing gold's performance during the same period, silver has mounted an almost violent challenge to the throne of precious metals. But rather than a victory parade, it's more like a tightrope performance—beneath the rope lurk the ghosts of the 1980 Hunt brothers' short squeeze crash, the panic of near-liquidity exhaustion in the London market, and the warning of Shanghai Futures Exchange inventories halving to 688 tons this year.

The underlying driver of this silver rally is the explosion of supply-demand tensions pushed to extremes. Global silver supply has fallen short of demand for five consecutive years, with the photovoltaic industry's voracious appetite devouring a 678 million-ounce inventory gap over the past four years—equivalent to 60% of London's total inventories in early 2021. Add to this the flood of Diwali consumption demand from India today, and this market—with daily trading volume of 250 million ounces but free float shrunk to under 150 million ounces—was bound to erupt sooner or later.

Yet when we cut through the fog of soaring prices, we find silver at a delicate crossroads. In the short term, this is a high-risk moment of coexisting danger and opportunity: Fundamentally different from gold and copper in both financial and commodity attributes, it faces multiple risks including potential ETF outflows and valuations deviating 82% from historical averages. Should speculative sentiment reverse, its fall could be even more brutal than its rise—October's single-day 8.7% plunge remains a fresh warning.

But zooming out to the next decade, photovoltaics, electric vehicles, and AI data centers—these three industries reshaping human civilization—all desperately crave this metal with the highest electrical conductivity. Solar capacity expands at 17% annually, EVs use ~70% more silver than ICE vehicles, and global data center IT power has grown 53-fold over 25 years. Silver's industrial indispensability is building a price foundation far more solid than speculation.

For investors staring at silver's candlestick charts now, the most rational strategy may be: Respect short-term madness, position for long-term certainty. Those mining companies that can convert rising silver prices into profit growth may offer a "boarding pass" safer than silver itself or its derivatives—letting investors ride the bull market while securing long-term value.

01   Undercurrents Beneath the Frenzy

As investors flock to silver's 100%+ YTD gains, few recognize a critical truth: Among precious and industrial metals, silver is uniquely vulnerable. Lacking central bank backing like gold or deep industrial buffers like copper, this "neither-here-nor-there" identity is precisely why silver's risks are underestimated.

London, silver's global pricing hub, holds ~$50B in tradable silver value vs. gold's $1.2T—a 20x+ gap. Crucially, gold has an invisible "lender of last resort": global central banks. The Bank of England's vaults alone store ~$700B in gold reserves deployable during liquidity crunches to stabilize prices. Silver has never had—and likely never will have—such a net. October's London silver squeeze proved this when prices crashed 8.7% in a day (2021's worst drop) with no intervention.

Such volatility is now routine. The SHFE had to emergency-widen AG2602 futures' daily limits to 15% and hike margins to 17% on Dec 10—a "circuit breaker" against speculation. By contrast, gold's record highs show far milder swings, without silver's 5%+ intraday spikes.

This fragility has pushed silver into dangerous valuation territory. The gold/silver ratio's 20-year average of 68 (68 oz silver = 1 oz gold) spiked past 100 earlier this year, signaling silver's undervaluation and attracting capital. But post-rally corrections tend to overshoot: After the 1980 Hunts squeeze, silver crashed from $50 to under $10; its 2011 $49 peak met similar fate. Today's record highs with still-elevated ratios are a warning.

Thus, any gold-equivalent bullish view on silver is highly suspect.

Worse, investment flows have inflated real demand growth. 100M+ oz of ETF inflows this year locked up inventories, tightening supplies. While industrial demand is real, ETF leverage is undeniable. If redemptions hit, frozen silver would flood markets, potentially creating gluts and eroding price support.

In short, silver's party is real—but so is its shaky foundation. Chasing spot or ETFs now is unwise.

02Silver's Long-Term Thesis

Short-term risks don't negate silver's value. Ironically, volatility fears create entry points for long-term investors. The key question: How to capture silver's structural bull while sleeping through its mood swings?

The answer lies in three civilization-shaping industries: photovoltaics, EVs, and AI data centers—all building unshakable demand foundations for this supreme conductive metal.

Solar is silver's biggest industrial driver. Global PV capacity grew 10x+ last decade, with IEA forecasting 17% annual growth through 2030. Notably, next-gen TOPCon and heterojunction cells use ~50% more silver than PERC despite higher efficiency. Though copper plating may replace some paste, silver's PV dominance won't be unseated soon.

EVs are another rising demand pole, using 67-79% more silver per vehicle (for battery systems, motor contacts, charging ports). By 2027, EVs will surpass ICE as auto's top silver consumer. Meanwhile, global charger networks keep pushing demand higher.

Like copper, AI unlocks a third demand window. Data center IT power has ballooned 53x since 2000 (from <1GW to ~50GW by 2025), with every server, GPU, and connector relying on silver for signal integrity. Its compute demand is just emerging.

PV + EVs + AI = silver's bedrock demand. Their shared traits—clear growth, policy support, hard substitution—anchor long-term value in energy/digital transitions. The strategic question becomes: How best to ride this wave?

For most, physical ETFs like $23B AUM SLV (+109% YTD, 510M oz) offer direct exposure but full volatility. Miner ETFs (e.g., SIL: +142% YTD, 39 stocks) leverage operational gearing—fixed costs amplify profit margins when prices rise. Aggressive investors might target junior miners via SILJ.

HKEX's Zijin Mining (60.23% mine margins) and NYSE's Coeur Mining (CDE), Wheaton Precious Metals (WPM—streaming model) also offer silver plays.

03   Conclusion

Pathways depend on risk appetite. SLV suits pure price exposure; SIL/SILJ magnify returns with volatility; selective miners balance growth and downside protection. One certainty: Silver's demand is hardcoded into energy/digital futures Short-term noise will fade—those who see through it will reap time's rewards.$ZIJIN MINING(02899.HK) $JCCL(600362.SH) $iShares Silver Tr(SLV.US)