Silver Extends Rally on Fed Rate-Cut Expectations and Persistent Global Supply Deficit

Silver prices posted strong gains in both local and global markets on Tuesday, supported by mounting expectations that the U.S. Federal Reserve will continue its monetary easing policy in December, according to a report by the Safe Haven Center.

The report noted that 800-grade silver rose from EGP 65 to EGP 68 per gram, 925-grade climbed to EGP 79, and 999-grade reached around EGP 85, while the silver pound coin remained stable at EGP 632.

Globally, silver jumped from $48 to $51 per ounce, extending its rally for the third consecutive session, after having touched $55 per ounce in mid-October — the highest level in four decades — supported by growing expectations of interest rate cuts.

Data from CME FedWatch shows that markets are currently pricing in over a 60% chance of another rate cut, boosting the appeal of non-yielding assets such as silver.

This comes amid weak U.S. economic indicators, including a decline in the University of Michigan Consumer Sentiment Index to 50.3 in November — its lowest since mid-2022 — along with weakening employment and sluggish retail sales.

According to the report, these developments strengthen expectations that the Federal Reserve will focus on supporting economic growth rather than tightening to combat inflation — an environment typically favorable for precious metals.

Meanwhile, the partial resolution of the U.S. government shutdown has improved investor sentiment, though concerns remain about its economic repercussions.

The Senate passed the funding bill by a vote of 60 to 40, paving the way for federal agencies to reopen in the coming days. However, the delay in official economic data releases may hinder the Fed’s ability to assess the economy’s true performance.

The U.S. dollar index stabilized around 99.60, awaiting fresh signals from Federal Reserve officials. ING Bank warned that markets may be underestimating the risks of a dollar decline once economic data resumes and growth indicators weaken.

The report emphasized that silver remains supported by a combination of safe-haven demand and loose monetary expectations, although an improvement in the political outlook could slow the pace of gains.

More than 60% of global silver demand stems from industrial uses, particularly in technology and solar energy, making the metal sensitive to both economic cycles and technological innovation.

The report added that the silver supply deficit has persisted for the fifth consecutive year, driven by rising industrial demand and critically low above-ground inventories.

Amid U.S. tariffs introduced by President Donald Trump, banks and investment funds have stockpiled large quantities of silver in New York as a hedge against potential policy shifts.

Conversely, record Indian demand has drained inventories in London, pushing silver lease rates to historic highs exceeding 34% last month, as the spot price surged faster than futures — a phenomenon known as backwardation.

The report also noted that silver’s inclusion in the U.S. list of critical minerals has elevated its strategic importance. In April, the U.S. government launched an investigation under Section 232 to assess critical mineral supply chains and reduce import dependence, which could increase market volatility and pressure supplies.

However, the report cautioned that rising prices might lead solar energy companies to cut silver usage in panels, given that silver accounts for around 15% of production costs. Some manufacturers are exploring copper-based alternatives, though the technology remains in early testing stages.

According to the report, silver inventories in London Bullion Market Association (LBMA) vaults rose 6.8% in October to 26,255 metric tons, valued at $41.3 billion, slightly lowering short-term borrowing costs — though they remain historically elevated.

In contrast, U.S. COMEX warehouses saw an outflow of about 1,568 tons since early October, reflecting a shift in global storage patterns.

Market experts noted that physical shortages in certain regions had driven last month’s price spike, though Daniel Ghali, Chief Commodity Strategist at TD Securities, warned that the market remains vulnerable to corrections as supply conditions improve.

The report concluded that silver has regained its shine after being officially added to the U.S. Geological Survey’s 2025 list of essential minerals, a move expected to boost industrial demand and tighten physical markets, even as short-term corrections remain likely.