Gold and silver are crazy! I missed it before, can I still get in now? I believe many people have seen gold and silver almost dominating the screen these days, but many people completely do not understand the logic behind silver's rise. Today, I will discuss the fundamental logic behind silver's rise.
Creation is not easy. First praise, then it looks good. Develop a habit, thank you! I hope this helps you!
First of all, the forces driving silver prices are definitely not just one. If you only regard silver as a 'precious metal', you will never understand why it either stays still or goes crazy when it rises, comparable to the meme coins in the crypto world. To truly understand the market for silver, you need to return to the most fundamental structures and logic.
First, the most fundamental essence: silver is not merely a precious metal, but a hybrid of 'industrial metal + monetary attributes'
This is the first principle for understanding all silver trends. Silver naturally possesses two attributes, and these two attributes do not take turns acting but often exist simultaneously.
First layer: monetary attributes (same source as gold) China has used a silver standard for over 2000 years, only recently switching to paper currency.
Anti-inflation
Hedging against fiat currency credit risk
Bearing risk aversion emotions
In a deteriorating macro environment where monetary credit is diluted, silver, like gold, will be treated as a 'non-sovereign credit asset'.
Second layer: industrial properties (far stronger than gold)
Solar photovoltaic
Semiconductors
Electronic components
Electric vehicles
Military and high-end manufacturing
Silver has irreplaceable characteristics in many high-end industrial scenarios, which means its demand does not entirely depend on emotion but is deeply bound to the real economy and the industrial cycle.
The continuous rise of silver has never been due to a 'single logic,' but is the result of simultaneous efforts from monetary demand and industrial demand. This also explains a classic phenomenon: gold often rises slowly, while once silver starts, it often experiences violent rebounds and accelerated rises, comparable to cryptocurrencies.
Second, the real first driving force: real interest rates
If I could only choose one indicator to explain the rise of silver, it would definitely be real interest rates, no exceptions.
The core formula is only one: real interest rate = nominal interest rate - inflation expectation
When real interest rates start to decline or even turn negative, the logic of asset allocation will fundamentally change:
Holding cash essentially is being continuously eroded by inflation
Holding bonds means actual purchasing power is declining
In such an environment, funds will naturally flow to gold and silver.
Here comes the question! Why is silver more sensitive to real interest rates?
The reason is the different positioning of the two:
Gold: mainly a store of value asset
Silver: store of value attributes + strong cyclical attributes
Throughout the cycle of declining real interest rates, silver’s volatility is often greater, and its trend is more exaggerated.
So what should we focus on in trading?
US Treasury real yields, especially 10-year Treasury TIPS
Inflation expectations are clearly rising, but interest rates are not keeping up
Remember, silver does not rise only when interest rates are cut, but as long as real interest rates decline, it will definitely benefit silver; there will still be space in the future!
Third, the second driving force: US dollar credit and the US dollar index (DXY)
Silver is a typical US dollar-denominated asset, and this cannot be avoided. The most favorable conditions for silver are not limited to 'the US dollar falling'; in fact, there are three typical environments:
1️⃣ The US dollar is weakening
2️⃣ The US dollar is strengthening, but the market begins to question US dollar credit (credit crisis)
3️⃣ The US dollar is in a high-level fluctuation stage, with funds rotating between risk assets
Many important trends for silver do not occur after the US dollar has already fallen significantly, but appear near the turning point when the dollar shifts from strong to weak. There is a very easy-to-overlook cognitive bias: silver does not 'immediately surge once the dollar drops'; the real igniter is the marginal weakening of the dollar.
Fourth, the third driving force (usually occurs after gold): gold-silver ratio
This is silver’s unique 'lever switch'. What is the gold-silver ratio? Gold-silver ratio = gold price ÷ silver price
Long-term historical center: 50–65
Extreme panic stage: above 80-100
How does a big market for silver come about? Almost every time, it follows the same path:
1️⃣ Gold strengthens first, and funds choose 'safe assets' first
2️⃣ The gold-silver ratio has been raised to a high level
3️⃣ Funds begin to switch positions from gold to silver
4️⃣ Silver enters an accelerated rebound phase
So often gold has risen for a while, and silver suddenly rises crazily like being ignited; fundamentally, gold provides logic, while silver provides volatility.
Fifth, the fourth driving force: imbalance in supply and demand structure
This is a long-term factor, but extremely critical.
The reality on the supply side
Silver is mostly a by-product, dependent on copper, lead, and zinc
It's not that production can be increased just by wanting to
Long-term insufficient capital expenditures in mines
Changes in the demand side
The demand for silver in photovoltaics is huge and hard to replace
Demand for high-end electronics and AI hardware continues to grow
Military demand is rigid
Long Ge implements silver control, restricts exports, and designates silver as a strategic reserve
This ultimately leads to one result: demand is structurally rigid, while supply is passive and lagging. This is also why silver is often undervalued in the long term, and once funds truly awaken, it can only quickly rise in price to forcibly repair the supply-demand contradiction, just like now.
Finally, let's summarize how we analyze and judge the rise of silver
First, do not look at a single message, but at the comprehensive synergy; if real interest rates decline, there will still be space in the future. When gold strengthens and the gold-silver ratio turns at a high level, it often signals a turning point in the market.
Second, silver is not a slow bull, but a phase of mad bull; the sideways period is often very long, but once it breaks through, the speed is extremely fast, small stop loss and big take profit, but you have to hold on (it is already in a stage of crazy rise now).
Third, the more suitable way to enter the market for silver (understanding and waiting for opportunities): break through the consolidation zone + retracement + confirm entry with trading volume; it is highly discouraged to bottom fish or top catch from the left side. Ultimately, the essence of silver's rise is that under the backdrop of declining real interest rates, funds choose an asset that has long been undervalued, has supply-demand imbalance, and can amplify inflation expectations—that is silver.
So can silver still enter the market now? Overall, short-term doesn't matter, for minutes or hours you don't need to analyze fundamentals, just look at the K-line for profit-loss ratios and trade. If preparing to hold for a few days, or even a few months, it's not recommended to chase high prices in the long term; wait for a consolidation at the 4-hour to daily level, and look for opportunities after breaking through or falling below the consolidation zone.
Done for the day! Thumbs up!!!!!!!!!! If you have questions, I'll work extra hours!
