Supply Shortage Fears Push Silver to 14-Year High as Fed Rate-Cut Bets Grow

Silver prices surged sharply in both local and global markets on Tuesday, with the metal approaching its highest level in 14 years. The rally was driven by growing expectations that the U.S. Federal Reserve will cut interest rates at its upcoming mid-September meeting.

According to a report from the Safe Haven Research Center, the price of 800-grade silver rose by one pound to EGP 55 per gram, while globally, the ounce climbed from $42 to $42.80. In Egypt, 999-grade silver recorded EGP 69 per gram, 925-grade silver stood at EGP 64, and a 925-grade silver pound coin reached EGP 512.

Correlation With Gold and the Gold-Silver Ratio

Silver’s sharp rally coincided with rising gold prices after a dip last Friday. The gold-to-silver ratio stood at around 86, close to its lowest level this year recorded in early September. Since the start of 2025, silver has gained nearly 50%, outperforming even gold.

Investor Behavior and ETF Flows

The report highlighted mixed investor sentiment. The world’s largest silver exchange-traded fund (ETF) recorded outflows of 313 tonnes last Wednesday and Thursday, before reversing course with 192 tonnes of inflows on Friday. Analysts note this reflects a divided outlook on silver’s future trajectory.

Still, analysts agree that as long as gold continues to rise, silver is likely to maintain upward momentum, even if reclaiming its all-time record near $50/oz from April 2011 remains a distant prospect.

Drivers of the Rally: Monetary Policy and the Dollar

Investors are betting on imminent Fed rate cuts, reducing the opportunity cost of holding non-yielding assets such as silver.

A weaker U.S. dollar makes silver cheaper for foreign currency holders, boosting demand.

Falling Treasury yields have further increased appetite for precious metals.

Silver’s Industrial Dimension

Unlike gold, silver is both a safe-haven asset and an essential industrial metal used in:

electronics,

solar panels and renewable energy projects,

electric vehicles.

This dual role makes silver more volatile than gold but also positions it for stronger structural demand amid the global shift to clean energy and advanced technology.

Global Supply and Demand

There are clear signs of tightening supply and rising premiums for physical silver in some markets. Analysts at TD Securities warned that continued investment demand, combined with market deficits, could deplete inventories at the London Bullion Market Association within seven months—or even four months if buying accelerates.

Inflation and Economic Data

U.S. CPI for August showed 2.9% annual inflation, up from 2.7% in July.

Core inflation held steady at 3.1%.

Nonfarm payrolls data revealed significant labor market weakness, with only 22,000 jobs added versus expectations of 75,000, while unemployment climbed to 4.3%, the highest since late 2021.

These figures reinforced market bets on a Fed rate cut, with the CME FedWatch Tool showing an 88% probability of a 25-basis-point reduction at the September 16–17 meeting, versus just 12% odds for a larger 50-bp cut.

Institutional Views

Major financial institutions such as HSBC have raised their silver price forecasts, citing rising technology-related demand and shrinking supply. Fed Chair Jerome Powell also signaled at the Jackson Hole symposium that the central bank is prepared to prioritize labor market stability if signs of weakness intensify, boosting expectations for monetary easing.

Silver as Investment and Store of Value

Silver remains a key tool for preserving purchasing power during inflationary periods. With the gold-to-silver ratio above 86—well above its historical average of 50–60—analysts view silver as undervalued relative to gold.

Many believe silver is now better positioned than gold due to its industrial applications, while gold’s role remains primarily monetary. Supported by expectations of Fed rate cuts, a weaker dollar, growing industrial demand, and heightened geopolitical risks, silver is steadily advancing toward new historic levels.

Analysts suggest that the coming years may see a strategic reallocation of silver within global investment portfolios, as it remains relatively undervalued compared to gold.

Key Market Concepts Explained

Spot Silver Price: the price at which silver can be bought or sold immediately in the market. In practice, investors typically pay above spot to cover costs such as shipping, insurance, and dealer premiums.

Price Spread (Bid-Ask): the gap between the ask price (what buyers pay) and the bid price (what sellers receive). A narrower spread indicates stronger demand and higher market liquidity.