Silver delivered a whopping 144% return last year, and its momentum flowed into 2026, culminating in a record high of over $120 per ounce on Jan. 30. Some investors treat silver like gold, as a store of value, which they buy during times of heightened political and economic uncertainty. However, silver also has vast industrial uses that soak up a significant amount of supply each year.
Many investors choose to own the iShares Silver Trust (NYSEMKT: SLV) as an alternative to physical metal. It’s an exchange-traded fund (ETF) that directly tracks the price of silver and can be bought and sold instantly through any investment platform with just a few clicks.
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Unfortunately, the ETF plunged by as much as 38% over the past week, in line with the sharp decline in the price of silver, as the blistering run over the last 12 months came to an abrupt halt. History says this could happen next.
Silver isn’t quite as popular as gold as a safe-haven asset, mainly because it’s far more abundant, with miners extracting around eight times more of it from the ground each year. However, gold isn’t widely used in industrial settings because of its scarcity and high price per ounce, whereas almost half of silver’s annual supply is used up in areas like electronics manufacturing.
China is the world’s second-largest exporter of silver behind Hong Kong. In December, it announced a fresh set of restrictions to limit how much of the metal producers could ship out of the country, which sent the price per ounce soaring. China is one of the world’s top electronics manufacturers, so it’s trying to protect its domestic supply chains, but the new restrictions also give the country leverage in trade negotiations with rivals like Europe and the U.S.
With all of that said, silver’s 2025 rally kicked off long before December. Investors were piling into precious metals to hedge against a surge in government spending, which stoked fears of a significant increase in money supply. During fiscal 2025 (ended Sept. 30), the U.S. government ran a budget deficit of $1.8 trillion, taking the national debt to a record high of $38.5 trillion.
Even though metals don’t grow organically by producing revenue or earnings, they do rise in value as paper currencies depreciate. An old mechanism called the gold standard used to prevent the U.S. government from printing additional currency unless it had an equal amount of physical gold on hand to match.
Source: finance.yahoo.com
