This expert believes silver has more room to rally

Silver prices have been on a steady climb in 2025, fuelled by a strong mix of industrial demand and tightening supply. According to Satish Dondapati, VP and Fund Manager at Kotak AMC, this rally is not just a short-term blip but reflects deeper trends in global markets.

“The biggest trigger for the recent surge in silver prices has been a combination of robust industrial demand and supply constraints, amplified by ongoing geopolitical tensions,” Dondapati said.

One clear sign of silver’s outperformance is the drop in the gold-silver ratio — from over 100 to around 93. This metric, which shows how many ounces of silver it takes to buy an ounce of gold, suggests silver is gaining ground.

Dondapati noted that historically, the ratio tends to hover around 60.

If it returns to that range, silver prices could climb significantly. “If gold stays around $3,400 an ounce, a ratio of 80 would imply silver at $42.50 an ounce, and at 70, silver could reach $48.57 per ounce,” he added.

Despite its recent rally, Dondapati believes silver remains undervalued compared to gold. “Silver hasn’t yet caught up to gold’s rise. Its dual role as both an industrial and precious metal still offers upside potential.”

Industrial demand is now the dominant force behind silver’s momentum. Over 50% of global silver consumption today comes from industries such as solar energy, electric vehicles (EVs), and electronics.

“Each solar panel uses roughly 20 grams of silver. Add to that its role in EV batteries, wiring, sensors, and even AI technologies — and the demand is growing fast,” he said.

On the supply side, silver is facing its fifth straight year of deficit, with a projected shortfall of about 149 million ounces in 2025. Recycling rates have stagnated and ore quality is declining at key mines.

“Major producing countries like Mexico and China are seeing declining reserves. Meanwhile, geopolitical tensions and trade tariffs are straining global supply chains,” Dondapati explained.

The rising interest in silver isn’t limited to industrial users. Younger investors are also flocking to the metal. “Silver is more accessible than gold due to its lower price. It’s gaining traction on digital platforms, making it popular with younger investors seeking diversification,” he said.

Silver's identity as both a safe-haven asset and industrial commodity makes it unique. While its appeal as a hedge remains intact, Dondapati believes industrial use will drive prices. “Going forward, industrial demand from sectors like solar, EVs, and AI will play a more dominant role in shaping silver’s price.”

Looking ahead, the outlook remains optimistic. “Silver prices are likely to rise over the next 6-12 months due to strong industrial demand, supply constraints, a weakening US dollar, and supportive macroeconomic trends,” he said.

However, he cautioned that silver isn’t without risks. “Price volatility, interest rate shifts, and stronger dollar movements could impact returns. Also, any slowdown in industrial demand or spike in supply might cool the rally.”