Gold (XAUUSD) has been the talk of the town in 2025 and is on track for its best year since 1979 with a 59% return. However, Silver (XAGUSD) has outperformed gold with a year-to-date return of 99% and reached a new all-time high of $60 per ounce on Tuesday.
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Both precious metals are trading higher ahead of the Fed interest rate decision tomorrow, where the central bank is widely expected to cut rates by 25 bps.
Silver Gains from Rate Cuts, Industrial Demand, and Tariff Fears
Lower rates benefit both silver and gold because they don’t pay out interest. In other words, the opportunity cost of holding the metals relative to interest-bearing assets, like Treasuries, goes down with lower rates.
Furthermore, demand for silver has risen in recent years for its applications in electronics and solar equipment. “As the use of electricity and AI and all of that grows, we need more and more silver, and supply has just not kept up,” said Sprott Asset Management CIO Maria Smirnova in an interview with Kitco News. “So this has been building for several years.”
Fears of U.S. tariffs on silver have also led to a rise in stockpiling, with Comex silver inventories surging to three times their historical average.
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