Recently, the strong rally in silver prices has aligned with the trends of other precious metals like gold, with financial attributes remaining the primary driver behind the price surge.
Based on market macro commentary and SMM exchange summaries, the key factors behind silver's record high in September include:
1. Accelerated Expectations for US Fed Interest Rate Cuts
The US Fed's interest rate cut cycle has set the tone for silver's high-level fluctuations in H2 2025. The September market was influenced by the following events: Fed Chairman's dovish remarks at the Global Central Bankers' Annual Meeting and the August 29 release of US July PCE data, which met expectations and further supported monetary easing. According to CME FedWatch Tool, market expectations for a Fed rate cut rose from 63% a month ago to 87%. On September 1, gold prices approached previous highs, while silver broke through prior peaks to reach its highest level in nearly 14 years.
2. Recurring Geopolitical Conflicts
In August, tensions in the Russia-Ukraine conflict and Middle East situation eased, with traders optimistic about potential negotiations. However, on September 1, the European Commission President proposed concrete plans to deploy European troops to Russia, casting shadows over peace prospects.
3. US Fed Independence Under Scrutiny
Following the Trump administration's dismissal of Fed Governor Cook, both sides engaged in heated courtroom debates. On one hand, any erosion of the Fed's independence could severely impact US dollar credibility. On the other, markets fear US monetary policy may become politicized, triggering simultaneous declines in stocks, bonds, and currency. Short-term, safe-haven demand for precious metals like gold and silver has gained liquidity support, but medium and long-term price correction risks have intensified.
4. Silver Added to Critical Minerals List
On August 25, the US Geological Survey released a draft update to the Critical Minerals List, proposing to classify six minerals - copper, potash, lead, rhenium, silicon, and silver - as critical. While this event hasn't immediately affected short-term silver prices, concerns persist that the US may invoke Section 232 of the 1962 Trade Expansion Act to impose hefty tariffs on imported silver ingots and powder. Citi notes the US relies on imports for 64% of its silver supply, with current COMEX futures premiums underestimating tariff risks. Macro Perspective Analysis
The US Fed's interest rate cut expectations in September and within the year, combined with geopolitical risks, were the primary drivers behind this round of price increases. The supply and demand fundamentals also support a bullish trend for silver prices, with steady domestic industrial consumption demand and potential short-term supply disruptions due to expected smelter maintenance in September. Additionally, hot topics such as Europe's military restructuring and the US's reindustrialization may lead to adjustments in the global silver balance. However, this is only one of the factors supporting medium and long-term fluctuations at highs for silver prices, and it cannot significantly push prices higher in the short term.
Risk Warning
Although the long-term trend for silver remains positive, resistance above key levels is strong after breaking through, with technical indicators showing historical trapped positions pressure near $40/oz. If gold prices slow down and no new substantial macro-level positive factors continue to drive the market, profit-taking may occur. The rapid price rise has already raised concerns. Despite the possibility of overseas silver prices climbing further to a target of $42/oz and domestic prices adjusting to 10,000 yuan/kg in 2025, the upside potential is relatively limited. Given silver's historically large pullback volatility, investors should avoid blindly chasing highs in the short term and remain cautious of the risk of falling back from highs.
