Silver will outperform gold again in 2025 as China, U.S. rebounds absorb inventories, driving spot price to $36/oz – TD Securities
NEW YORK (December 27) Silver was the most exciting play in the entire commodities complex this year, and the gray metal is set to outperform gold once again in 2025, according to commodities strategists at TD Securities.
In their 2025 Commodities Outlook, TD Securities analysts said that the strengthening economies of the United States and China in the second half of 2025 will stimulate demand and tighten the undersupplied silver market, with excess inventories getting absorbed over the coming year.
“The white metal may get squeezed, as recovering Asian demand absorbs recent inventory builds in the aftermath of the Chinese slowdown and the base metal concentrate processing capacity increases,” they wrote. “We project the metal to average $36/oz in the final months of next year, making it a commodity outperformer as the XAUXAG ratio challenges yearly lows. How the new Trump administration manages the Inflation Reduction Act commitments, climate issues, and tariffs on Chinese products containing silver will be key to how the metal performs.”
The analysts added that “the #silversqueeze you can buy into was the most exciting trade across the entire commodities complex” in 2024, but they still see massive growth potential for the precious metal during the year to come.
“Make no mistake, silver's rally over the course of the last year has overwhelmingly been tied to gold's, but we note an explosive convexity in the set-up which points to a legitimate case for the erosion and eventual depletion of free-floating inventories on the horizon,” they said.
TD believes that the increased ETF buying activity that comes with a typical Fed cutting cycle “could dramatically shorten the time span to depletion” of existing silver inventories.
“This is far from a typical cycle, with additional upside associated with potential threats to the Fed's independence that could plausibly bolster precious metal's investment appeal even further,” they said. “ETF buying activity is a crucial catalyst for a potential drain in LBMA inventories, given they erode the availability of metal that is 'freely available' to purchase in the world's largest vaulting system.”
“Should ETF purchases progress along their average path in a typical Fed easing cycle, the LBMA's entire 'free float' would be nearly eroded,” they warned. “In fact, there is not enough metal currently available for purchase to satisfy ETF purchases that are akin to the path observed in the exceptional pandemic-era cutting cycle.”
And while investment demand ramps up, burgeoning solar demand also provides fundamental support as it continues to beat expectations.
“Traditional industrial demand weakness has created cross-currents for the drain in the free float, but a resilient US economy could prevent further weakness in these sectors,” TD said. “At the same time, fears that China is nearing the end-stages of its sigmoid curve in solar technology adoption are unwarranted, given global solar installations are still in a healthy stage of technology adoption that warrant substantial increases in capacity on the horizon.”
“While a Trump Administration may be detrimental for domestic solar capacity growth, the rest-of-the-world remains on a trajectory to notably add to its capacity,” they noted.
“Most importantly, prices have remained elevated for some time, but we see no sign that the ‘boogeyman’ is rearing its ugly head,” the analysts said. “Customs data show no rise in exports that could be tied to private vault holdings across the globe, suggesting we have not yet reached the strike price that could incentivize private vault holdings to flood the market.”
TD believes that even with silver at multi-year highs, the market has not yet reached a high enough price “for any of the pressure release valves we have identified to flood the market.”
“The set-up necessitates higher prices to unlock inventories from unconventional sources,” they concluded. “This is the most convex trade in the complex, and fund positioning appears much cleaner in silver markets than in gold markets. In turn, we expect notable silver outperformance on the horizon.”
TD Securities’s detailed forecasts have spot silver trading at $33.25 per ounce in the first quarter of 2025, $33 in Q2, $34 in Q3, and topping out at $36 per ounce in the fourth quarter. Their outlook for the following year is even more bullish, as they see the gray metal trading between $38 and $39 per ounce in 2026.
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