Silver Faces Further Depreciation Against Gold as Physical Market Cools

Silver’s recent slump reflects a broader shift in market dynamics, with spot prices dropping to $52.06 an ounce. While gold has maintained a support level near $4,015.60, silver has struggled under the weight of higher bond yields and persistent inflation. The Federal Reserve’s hawkish stance—coupled with an 80% market probability of a December rate hike—continues to increase the opportunity cost of holding non-yielding assets, disproportionately affecting the more volatile silver.

Supply-side pressures have compounded these macroeconomic headwinds. London vault inventories have surged to 932 million ounces, the highest level in four years. Simultaneously, exchange-traded products have shed 60 million ounces this year, while speculative interest in CME futures has dwindled to 17 million ounces, a level not seen since early 2024. With primary bullion coin sales plummeting and manufacturers increasingly substituting cheaper materials in the photovoltaic sector, the market shift toward a surplus in 2027 appears likely. Metals Focus suggests that until industrial demand stabilizes or macroeconomic conditions shift, silver will remain tethered to gold’s performance, facing continued downside risk.