Silver prices have reignited their bullish momentum, rallying back above the $50-per-ounce threshold and hitting a three-week high as expectations mount for a Federal Reserve interest rate cut in December. Investors are piling back into precious metals markets amid renewed safe-haven demand, but analysts warn that surging silver supply and inventory replenishments may put a damper on sustained price advances.
Silver extended a five-day winning streak on Tuesday, climbing as high as $51.15 an ounce in European trading, a level not seen since October 21. The recent rally follows a hefty 4.5% gain on Monday, the steepest single-day increase since mid-October. The metal had previously dipped to test support near $48 per ounce but has since bounced back amid a flurry of market events and shifting macroeconomic expectations. Central to silver’s recent gains is renewed speculation that the Federal Reserve could lower interest rates at or before its December Federal Open Market Committee (FOMC) meeting. Fed Governor Steven Miran on Monday suggested that a 50-basis-point cut might be appropriate, citing declining inflation and rising unemployment. CME Group’s FedWatch tool now indicates a 63% probability of a 25-basis-point cut next month.
Rate-cut optimism has emerged in tandem with efforts to end the longest U.S. government shutdown in history. The Senate passed a funding agreement late Monday, keeping most operations running through the end of January and paving the way for the resumption of key economic data releases. A continuation of weak data could bolster the Fed's case for easier monetary policy, a scenario typically bullish for non-yielding assets like gold and silver.
In line with silver’s performance, gold prices also climbed to a three-week high, reaching $4,149.02 per ounce following a 2.9% surge on Monday. Despite the upward momentum in both metals, the U.S. dollar has remained surprisingly resilient, dampening gains slightly across the sector. The Dollar Index rose modestly by 0.15% on Tuesday, supported by easing geopolitical tensions and optimism over potential trade deals, including a thaw in maritime disputes with China and progress towards a U.S.-India agreement.
Beyond macroeconomic drivers, structural shifts in silver’s fundamental supply-demand dynamics continue to shape pricing. Silver surged to a record $54.48 per ounce last month amid unprecedented physical demand that drained inventories, especially in the London and Shanghai markets.
The U.S. Geological Survey’s decision to add silver to its 2025 List of Critical Minerals has heightened expectations for a long-term boom in silver’s industrial demand, particularly in clean energy, electronics, and battery technologies. Some analysts suggest that this designation could signal export controls or tariffs, further straining global supplies and driving prices higher.
However, while spot shortages and geopolitical factors previously fueled a “silver squeeze,” not all analysts are convinced the rally will endure. Daniel Ghali, Senior Commodity Strategist at TD Securities, warns the market may be underestimating the recent replenishment of silver inventories. He points to new data showing that London vaults have added a staggering 111 million ounces to their free float within weeks of the squeeze, bringing total estimated inventories to 198 million ounces. “The #silverflood may have been exacerbated by more than a simple reshuffling,” said Ghali. “Private vaults and scrap recycling likely contributed at least 30% of the monthly inflows, beyond what could be explained by traditional withdrawals from COMEX, SHFE, or ETFs alone.”
Ghali noted that while the silver squeeze may be ending, underlying market fundamentals haven’t changed dramatically. “Another rally would require either a sharper drawdown in Shanghai and New York inventories or new forms of trade restrictions that inhibit cross-border rebalancing,” he said.
From a technical perspective, the near-term picture for silver remains constructive. According to veteran analyst Jim Wyckoff of Kitco News, December silver futures have regained a firm bullish advantage. The next upside target lies at the all-time high of $53.765, while downside support sits around $48.235."The bulls have the near-term technical edge," Wyckoff commented, assigning silver a 7.5 out of 10 on his proprietary market strength scale. "Follow-through buying will be key to sustaining upside momentum. "Gold too remains supported technically, with its immediate target at $4,250.00 and primary support at $4,050.00. Wyckoff’s Market Rating for gold currently stands at 7.0.
Despite the bullish outlook, analysts caution that silver’s long-term trajectory remains vulnerable to supply shocks and currency shifts. The U.S. dollar, though slightly lower on the day, has maintained surprising strength, especially relative to the Japanese yen and British pound. Additionally, revived recycling pipelines and a broader release of vaulted stockpiles could flood the market with physical metal, capping price growth.
Meanwhile, sentiment in currency and equities markets remains fragile. A sharp rebound in the dollar or easing Fed rhetoric could quickly reverse speculative momentum in silver. Elsewhere, economic weakness in the UK and Japan may lead to synchronized rate cuts from major central banks, reducing the attractiveness of precious metals as alternative stores of value.
The silver market is once again in focus as macro drivers converge with supply chain narratives. While short-term price action appears bullish, underpinned by rate-cut hopes and industrial demand tailwinds, looming risks from rising inventories and potential policy shifts should temper investor enthusiasm. As the U.S. moves toward ending its government shutdown and unlocking a backlog of economic data, investors will be watching closely for signals that could either validate the current rally or reintroduce bearish pressure. For now, silver shines, but its luster could fade if the balance between speculative fervor and physical fundamentals tips unfavorably.