Silver’s 2025 Rally Tops 60%: What’s Driving the Surge?

Silver has been in the limelight this year, eclipsing gold and emerging as one of the star commodities of 2025. Beginning the year at about $28.92 an ounce, the metal has rallied over $46 by September end, a remarkable 60% gain in less than nine months. For Indian investors, the rise has been even more lucrative due to the decline of the rupee, which has swollen domestic returns. (Business Today)

With such a massive run-up, is it the right time to book profits or stay invested for the next big rally? Let’s find out what the numbers say.

A Year of Silver Strength: Why Has Silver Grown So Dramatically?

As per reports by Kotak Mutual Fund and Tata Mutual Fund, the rally in silver is taking place due to a rare combination of industrial growth, investment demand, and supply shortage. While gold has traditionally been the safe investment option in times of global uncertainty, silver has been riding a wave that spans both industrial and precious metal markets.

As per a report by Economic Times, 60% of silver’s demand comes from industrial uses, far greater than the almost exclusively investment-driven consumption of gold. Silver is used in producing solar panels, electric cars, and high-end electronics, all industries expanding rapidly worldwide. As China's economy shows signs of recovery, and renewable energy projects ramping up, demand for silver has gone up dramatically.

At the same time, supply has not kept pace. Global silver markets have been in a structural deficit for four consecutive years, and forecasts indicate a 21% shortfall in 2025, marking the fifth straight year of deficit. Such continuous shortage is one of the reasons why prices have continued to stay high despite profit booking episodes. (Economic Times)

The Economic Backdrop: Fed Cuts and Weaker Rupee

The macroeconomic environment has also favoured precious metals this year. The US Federal Reserve’s 25-basis-point rate cut in September 2025 weakened the dollar, pushing investors toward alternative assets such as gold and silver. Expectations of another rate cut later this year have added further momentum.

For Indian investors, a weaker rupee has made imported commodities more expensive but also more profitable in rupee terms. Since India imports over 92% of its silver, the depreciation has enhanced domestic returns, even as it adds to inflationary pressures.

As of early October, silver prices in India remained steady at ₹1,43,750 per kg, a significantly higher figure compared to earlier this year where it stood at ₹91,120 per kg in January.

Historically, How Has Silver Acted as a Crisis Hedge?

Kotak Mutual Fund emphasises silver's past performances, withstanding market volatility. For instance:

• During the Subprime Mortgage Crisis (2008–2009), when Nifty 50 dipped by 54%, silver increased by 13%.

• Silver increased 12% during the Russia-Ukraine war whereas Nifty 50 fell by 10%.

• Since the market correction since September 2024, silver has been higher by 3%, while equities fell by approximately 15%.

This trend reflects silver's function as a crisis hedge and a long-term value store, combining gold's defensive appeal with the upside of an industrial asset. (Economic Times)

The Gold-Silver Ratio

Another reason why investors favour silver is the Gold-Silver Ratio (GSR) or the ratio of the quantity of silver required (in ounces) to purchase an ounce of gold. Currently, at 83:1, it is above the historical average of 60:1, suggesting that silver is under-valued compared to gold.

A higher GSR would normally be a call to sell gold and buy silver, while a lower GSR would suggest the opposite. The ratio has been gradually trending lower the last few months, declining from 85 at the beginning of September to about 81, as silver has strengthened. Experts say it could fall to 75, supporting the metal's relative outperformance potential.

India's Expanding Appetite

India is now among the largest consumers of silver globally, occasionally surpassing the US in physical demand. Imports of silver in India had nearly doubled from September to August 2025 despite prices being at near-record highs. The demand is driven by industrial needs as well as by increasing investor participation through mutual funds and ETFs. (The Silver Institute)

What Should Investors Do?

Silver is a long-term value bet, but it is advised to not run after short-term gains. Volatility in metals is extreme with violent price swings that may not be to the liking of risk-averse investors.

Financial planners recommend holding silver as a strategic position in a diversified portfolio instead of speculative wager. Investing 5–10% in silver, preferably in ETFs, mutual funds, or electronic delivery, can be a diversification with little in the way of storage and purity issues associated with physical bullion.

Sources

Business Today
Economic Times
The Silver Institute