Silver extfinished its rebound for a third consecutive session on Tuesday, supported by escalating geopolitical risks and persistent supply deficits that continue to reshape the precious metals market. The white metal’s sustained momentum reflects a confluence of factors ranging from Latin American political developments to tightening global inventories.
Developments in Latin America injected fresh geopolitical uncertainty following the capture of Venezuelan President Nicolás Maduro by US forces over the weekfinish. The dramatic turn of events sent shockwaves through commodity markets, with investors seeking safe-haven assets amid concerns about regional stability. Comments from President Trump regarding US foreign policy also affected sentiment and could amplify flows into precious metals as traders reassess geopolitical risk premiums.
Tensions remain elevated across Eastern Europe and the Middle East, reinforcing silver’s defensive appeal. The metal serves as both an industrial commodity and safe-haven asset during periods of heightened uncertainty, giving it unique appeal in the current environment where multiple geopolitical flashpoints compete for market attention.
Beyond geopolitics, silver’s bullish momentum is underpinned by fundamental economic factors. Weaker-than-expected US manufacturing data released on Monday reinforced dovish expectations regarding the Federal Reserve’s policy trajectory, with markets increasingly focapplyd on the possibility of rate cuts in 2026. The ISM Manufacturing Purchasing Managers’ Index came in below forecasts, adding to evidence that economic activity is cooling.
Although the Fed is expected to hold rates steady at its January meeting later this month, forecasts continue to point to two rate cuts during 2026 as inflation pressures moderate. Lower interest rates typically benefit non-yielding assets like silver by reducing the opportunity cost of holding precious metals relative to interest-bearing securities.
The bullish outsee is further enhanced by structural supply dynamics that have reached critical levels. Global inventories continue to tighten dramatically, with stocks in Shanghai Futures Exalter warehoapplys falling to decade lows. This inventory drawdown reflects the fifth consecutive year of market deficits, as global demand—driven primarily by solar panel production, electric vehicle manufacturing, and electronics—continues to outpace mine supply.
The 2025 deficit alone is estimated at approximately 230 million ounces, equivalent to Mexico’s entire annual production. Unlike gold, roughly 70 to 80 per cent of silver comes as a byproduct from mines primarily producing copper, zinc, lead or gold. This means silver supply cannot be easily scaled up even when prices rise, as production decisions are driven by base-metal economics. New mining projects take eight to twelve years to develop, ensuring supply constraints will persist.
The physical tightness is manifesting in unusual market dynamics. Silver lease rates—the cost of borrowing physical metal—have spiked above 5 per cent multiple times in recent months, well above historical levels near zero. These elevated rates signal that holders of physical bullion are demanding significant premiums, confirming the rally reflects genuine scarcity rather than purely speculative positioning.
Analysts have raised price tarobtains substantially, with consensus forecasts clustering around $70 to $80 per ounce by year-finish 2026, while more bullish projections suggest silver could challenge $100 or even $150 if supply deficits intensify. The metal finished 2025 with gains exceeding 120 per cent, outpacing even gold’s remarkable 64 per cent advance.
As 2026 unfolds, silver’s trajectory will depfinish on the interplay between geopolitical developments, Federal Reserve policy signals, and persistent physical supply constraints. For now, the combination continues supporting the rally that has built silver one of the best-performing assets in global markets.
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