Silver Prices Shine Brighter than Gold: What is Really Happening?

Silver prices surged to their highest level in two months during trading on Wednesday (13/5/2026). Silver strengthened by 0.53% to US$86.54 per troy ounce in Tuesday’s trading (12/5/2026). Yesterday’s closing price was the highest since 10 March 2026, over two months ago. Silver has now risen for six straight days, soaring 19%. This contrasts sharply with gold, which plunged 0.43%. For the month so far, gold prices have risen 2%, while silver has skyrocketed 17%. This rise in silver prices is particularly noteworthy as it follows US consumer inflation data. US inflation rose higher than expected in April 2026, driven primarily by a surge in energy prices. The Consumer Price Index (CPI) increased 0.6% month-on-month and 3.8% year-on-year, slightly above market expectations. Meanwhile, core inflation, excluding food and energy, rose 0.4% month-on-month and 2.8% year-on-year, still well above the Federal Reserve’s 2% target. The annual inflation rate breaching 3.8% is the highest since May 2023. After the report was released, markets raised the odds of a Federal Reserve rate hike to around 30% by year-end. Nevertheless, the US economy is still considered resilient, supported by strong consumer spending, solid corporate profits, and a projected second-quarter economic growth of 3.7%. In normal conditions, such a situation would typically be negative sentiment for non-yielding assets like silver. However, this metal remains robust thanks to demand from the manufacturing sector, which uses silver in solar panels, electronic devices, and automotive components. Industrial Demand as the Main Support The strength of silver prices reflects its dual role as both a precious metal and an industrial raw material. Unlike gold, which is more sensitive to interest rates, currency exchange rates, and safe-haven fund flows, silver also gains support when manufacturing sector demand prospects remain strong. Industrial factors are now becoming increasingly important. Demand from solar power installations, electrical systems, electronic components, and the automotive industry helps create a “price floor” for silver, even when macroeconomic conditions are less supportive. As long as those sectors continue to grow, silver prices have the potential to remain resilient even with high global interest rates. Recent movements indicate that market participants are still focused on long-term structural demand prospects. This means the market no longer views silver solely as an asset sensitive to interest rates, but also as an industrial commodity with continuously increasing needs. Inflation and Interest Rates Still Pose Challenges Nevertheless, obstacles to further price gains remain evident. Consumer Price Index (CPI) data continues to be a threat. This strengthens the likelihood that the Fed will maintain a “higher for longer” policy, meaning interest rates will stay elevated for a longer period. For silver, this typically creates pressure because high interest rates tend to strengthen the US dollar and increase bond yields. Both factors reduce the appeal of non-income-generating precious metals. Therefore, the current silver price rally appears quite unusual. The fact that prices continue to rise despite heating inflation shows that the market is placing significant weight on physical demand and the tight supply-demand balance, rather than solely on monetary policy. The market is now awaiting the next US economic data, particularly ongoing inflation and employment figures. If inflation remains high and the labour market stays strong, the chances of Fed rate cuts become even slimmer. In such a situation, gold’s movements may remain limited, while silver has stronger upside potential as long as global industrial demand remains intact.