On January 20, Beijing time, both spot gold (London spot gold) and COMEX gold broke through $4,700 per ounce during the session, setting new historical highs. As gold prices reached record levels, international silver prices also climbed in tandem, with both spot silver (London spot silver) and COMEX silver surpassing $95 per ounce, also achieving a new all-time high. Consequently, the international gold-to-silver ratio has contracted to around 50 times.
Notably, since the start of the year, the rally in silver has significantly outperformed gold. By the close on January 20, the cumulative year-to-date gain for the main Shanghai gold futures contract reached 8.49%, while the main Shanghai silver futures contract surged by 35.15%.
Why has the increase in silver prices outpaced that of gold? "The recent surge in silver has been far stronger than gold's, primarily due to a supply-demand mismatch and the prominence of its industrial attributes," analyzed Sui Dong, a researcher at Shenzhen Qianhai Paipai Wang Fund Sales Co., Ltd. He explained that on the supply side, there is a global silver inventory shortage, compounded by policy controls hindering circulation. On the demand side, there is a surge in essential demand from high-tech sectors like photovoltaics, smart vehicles, and AI data centers, leading to a sharp increase in industrial consumption.
Sui Dong further stated that the silver market is much smaller than the gold market, meaning that equivalent capital inflows cause significantly amplified volatility. Low inventories make it difficult for short sellers to make deliveries, intensifying a short squeeze sentiment. Some investors are chasing the rally by viewing silver as "leveraged gold," further fueling its price increase.
Additionally, driven by heightened safe-haven demand, silver is attracting favor from off-market funds, especially when gold prices are elevated.
Regarding the recent price surge, Sui Dong cautioned that in the short term, silver's small market capitalization and high volatility make it susceptible to sentiment and capital flows after a rally, posing a risk of a significant pullback from highs. Particular attention should be paid to potential policy changes and profit-taking by speculative funds.
The continuously rising silver prices are also exerting pressure on downstream industrial demand. It is understood that silver has extensive and deep applications in the industrial sector, accounting for over 60% of its total demand, and holds an irreplaceable position in emerging industries like green energy and electronic technology. Among these, photovoltaic power generation is the single largest area of industrial silver demand.
Affected by rising silver prices, the photovoltaic cell manufacturing segment is facing significant cost pressures. Against this backdrop, downstream solar companies have begun actively seeking alternative solutions.
For instance, during an investor communication session on January 5, LONGi Green Energy Technology stated that due to the rapid price increases of silver and other bulk auxiliary materials, the company is actively promoting cost-reduction measures centered on base metal substitution. Regarding the progress, LONGi Green Energy Technology anticipates commencing mass production of base metal-based products in the second quarter of 2026, which is expected to further reduce module costs. The company has already begun constructing some base metal production capacity.
A relevant person from a photovoltaic company mentioned that currently, the prices of base metals like copper and aluminum are far lower than silver's. Furthermore, copper's electrical conductivity is second only to silver, making it the optimal choice for replacing silver. Currently, different technological pathways for reducing silver usage are being pursued within the photovoltaic industry.
Market institutions predict that under cost pressures, downstream sectors will accelerate the substitution with base metal pastes.
From a medium to long-term perspective, market participants generally believe silver prices could rise further. Wang Zheng, General Manager of Beijing Shangyi Private Fund Management Co., Ltd., stated that the supply-demand gap for silver is widening, with a projected deficit of 203 million ounces by 2026. Additionally, the Federal Reserve's interest rate cutting cycle is expected to support higher silver prices.
"The current gold-to-silver ratio has fallen to around 50 times, reflecting silver's strength relative to gold, which typically signals market optimism about industrial demand growth," Wang Zheng opined. He believes silver prices might experience high volatility in the short term, but if industrial demand resilience persists, silver could challenge $100 per ounce. Investors need to be wary of risks from policy shifts or sentiment reversals and should monitor changes in industrial demand and capital flows.
"Silver's industrial attributes are prominent, with persistent strong demand from photovoltaics, AI, and new energy vehicles, coupled with supply shortages that are difficult to quickly resolve, providing solid fundamental support," Sui Dong also concurred. He believes that from a medium to long-term view, the price center for silver is expected to trend higher. However, given its high volatility, future price movements will likely be characterized by volatile upward trends, necessitating strict position control for investors to manage risks.
