Silver Hits Record $63, Surpasses Microsoft

The market has witnessed a stunning momentum, recently with silver overtaking Microsoft to become the fifth-largest asset in the world by market capitalisation.

On Dec 11, the grey metal's total value surged above $3.59 trillion. This broke past the psychological price barrier of $63 per ounce for the first time in history.

The $63 per ounce milestone is the peak of a relentless rally that has seen silver prices gain >150% since early 2024. In early 2024, it was trading near a modest $25.

Silver is now sitting ahead of corporate titans like:

• Microsoft ($3.65 trillion)
• Amazon ($2.5 trillion)
• Alphabet's $3.8 trillion valuation (fast closing gap on the asset)

The silver rally is not just a speculative spike. It is marking silver's definitive return to record territory, surpassing its previous 2011 peak of $50.

The immediate trigger for this leg of the rally was the US Federal Reserve's recent 25 bps (basis point) rate cut, which had unleashed aggressive bullish positioning across the metals complex. There is an important question for the investors. Is the rally driven by the robust industrial demand, or is it pushed by the global macroeconomic factors?

Why Did Silver Surge Past Big Tech?

The ascent of Silver over a tech giant like Microsoft is symbolic. It signifies a broader rotation in global capital.

Microsoft is representing the pinnacle of the digital economy and AI revolution. However, silver's rise has underscored a renewed appetite for "tangible" stores of value.

There are two main forces that are driving this re-rating:

1. Inflation Hedge Demand: Inflation expectations remain slow in declining despite the Fed's rate cut. Investors are flocking to silver as a cheaper option with higher return potential compared to gold. This helps protect purchasing power. The “debasement trade,” which refers to investing in hard assets to hedge against currency erosion, is also in full swing.

2. Industrial Scarcity: Silver is not like gold, which is mostly hoarded. Instead, silver is consumed by the industrial sector. It is a critical industrial metal that is indispensable for the green energy transition (solar panels), electric vehicles (EVs), and 5G electronics. Reports are indicating a structural deficit in the silver market for the fifth consecutive year. However, the mine supply is stagnating while industrial demand explodes. This is a fundamental mismatch that has created a "perfect storm" for prices.

The Fed Shift’s Fuel For Fire

The recent monetary policy shift by the US Federal Reserve has given the much-needed spark for this breakout. The 25 bps rate cut was widely anticipated. However, the rate-cut signalled the end of the monetary tightening (strategy to fight inflation) cycle.

Now, a lower interest rate can reduce the "opportunity cost" of holding non-yielding assets like precious metals.

The rates are falling, and the dollar is weakening. This is making dollar-denominated commodities like silver cheaper for global buyers. The interest rates and dollar movement dynamic has triggered a wave of buying from both institutional funds and retail investors.

Furthermore, the market is pricing in further easing into the new year, creating a supportive environment for commodities to thrive. Investors are counting on the central banks to prioritise growth over inflation control. This is a scenario where silver historically outperforms.

A Strategic Shift In Portfolios

The rise of silver to the top tier of global assets is a wake-up call for diversified portfolios. It is a sign of the market environment where "real assets" are competing fiercely with financial and technology assets for dominance.

As the central bank lowers interest rates (the risk-free rate), the expected return on safe assets like bonds would diminish. Therefore, rational investors, seeking to maintain their yield targets, are forced to move further out on the risk curve, reallocating capital from cash and bonds into riskier or non-yielding assets like commodities and equities. The silver surge is a direct manifestation of this liquidity finding a new home in an asset class offering both an inflation hedge and industrial utility.

Sources:

Bitget
Value The Markets