Since the start of the year, silver prices have risen more than 30%. Real-economy demand from the solar and artificial intelligence (AI) industries, combined with investment demand from China and India, has fueled a rally that is treating silver as "more precious than gold." The Chicago Mercantile Exchange (CME) has raised margins four times since late last year to curb speculators, but the rally has been hard to break in the face of solid demand. The market expects the silver price rally to continue for the time being.
According to Investing.com on the 22nd, silver futures closed at $94.64 on the 20th (local time), up $6.10 (6.89%) from the previous session. Intraday, they jumped to $95.78. Silver prices are up 210% from the beginning of 2025 and have posted a vertical rise of more than 30% so far this year.
Investor money is also flowing in quickly alongside the price surge. Over the past month, 335.3 billion won flowed into KODEX Silver Futures (H) on a net basis, ranking 10th among domestic ETFs in terms of fund inflows. During this period, the return was 42.76%, overwhelming the returns of other investment assets such as gold.
◇ Chronic supply shortage of silver (銀)… demand surges and prices "soar"
Structural supply constraints are cited as the fundamental backdrop for the sharp rise in silver prices. Silver is a representative inelastic metal for which it is difficult to ramp up production in the short term even when demand increases. That is because half of total production comes as a byproduct of copper, zinc, and lead mines.
According to the Silver Institute, silver supply has remained flat at about 1 billion ounces annually from 2016 to 2025 with little fluctuation, while demand has steadily increased, leading to a supply shortage for the past five consecutive years.
Analysts say that with supply tied up like this and demand expanding at the same time, upward pressure on prices has intensified. In industrial sites, which account for more than 50% of silver demand, solar panels (70%) and AI data centers (30%) are sucking in silver like a black hole. Silver is essential in solar panels and power control devices, making it difficult to cut demand even when prices rise.
On top of that, investment demand is surging due to heightened geopolitical instability, including the arrest of the Venezuelan president, protests in Iran, and the Greenland situation. Historically, geopolitical instability has increased demand for safe assets such as gold and silver. This time, in particular, as gold prices have soared, investment demand has shifted to silver, which is relatively less burdensome in price. Investment demand is especially notable in China and India.
In addition, China's silver export controls in Oct. last year and the United States' designation of it as a "critical mineral" in Nov. collided, adding to "panic buying" for preemptive stockpiling, according to analysts.
◇ CME pulls the "card" of four margin hikes… unbroken demand for "silver"
As silver extended an explosive rally, CME responded by raising the margin barrier. CME carried out three swift hikes in silver futures margins on Dec. 12, 29, and 31 last year. As a result, the margin per contract surged from the $20,000 level to $32,500.
Then, starting on the 13th, it introduced a proportional margin system applying about 9% of contract value instead of a fixed amount. The higher the price, the more margin must be posted automatically. While leverage is the core of futures transactions—moving large positions with relatively small capital—margin hikes pressure investors' capital. Analysts say that investors who fail to meet margin calls may liquidate positions, potentially increasing short-term selling pressure.
Historically in the silver market, individual investors have mainly taken "long positions," betting on a rise, while global legacy banks such as Barclays, Standard Chartered, BNP Paribas, and Deutsche Bank have mainly taken "short positions," betting on a fall. Because individual investors have less cash capacity than banks, margin increases have raised their additional funding burden and induced them to reduce long positions. As a result, margin hikes have served as a factor restraining rapid rises in silver prices.
This time, however, the silver rally has continued even after the margin hikes. The market says investor sentiment has not easily weakened because the bullish case centered on physical supply-demand is solid. As of Dec. 2025, the size of short positions held by major traders amounts to about 90 days of global silver production. Accordingly, there is also speculation that some financial institutions have begun to unwind existing short positions.
◇ Experts: "Short-term volatility could increase… focus on demand in the long term"
Experts advise caution about the possibility of greater short-term volatility. If margin hikes and the introduction of proportional margins trigger short covering (liquidation of short positions) all at once, the market could see whipsawing prices.
However, optimism is dominant that the upward trend in silver prices will not be broken in the long term. Samsung Futures recently said silver could rise to $150 by the end of 2026. Citi Research set the three-month gold price at $100 per ounce.
Experts advise that when investing, you should confirm whether demand for physical assets is solid. An industry expert said, "From an industrial perspective, pay attention to the pace of silver's price increases relative to the selling price in the solar industry, and from the perspective of investment demand, watch whether demand for safe assets caused by geopolitical risks continues and when the global rate-cutting cycle ends."