Silver prices continued to surge after consolidating on a high plateau. Following a period of consolidation at elevated levels in late December 2025, silver prices resumed their upward trajectory in January. According to the Business Society Commodity Market Analysis System, the spot silver market price on the afternoon of January 13, 2026, was 21,043.67 yuan per kilogram, representing an increase of 13.87% compared to the peak spot price of 18,480 yuan per kilogram at the beginning of the month (January 3). The recent sharp rise in silver is the result of a confluence of macro-financial factors, supply-demand fundamentals, geopolitical risk aversion, and capital sentiment. The core drivers include heightened expectations for Federal Reserve interest rate cuts, a surge in industrial demand coupled with an expanding supply deficit, geopolitical tensions boosting safe-haven buying, and policies such as China's export controls, alongside speculative capital, collectively amplifying price volatility. The details are as follows:

Macro-Financial Factors: Rate Cut Expectations and a Weakening Dollar Lower Opportunity Costs
In January 2026, U.S. CPI and core CPI came in lower than expected, leading markets to increase bets on a Fed rate cut. The probability of a 25-basis-point cut in March rose to 75%, with the likelihood of consecutive cuts by June exceeding 90%. This pushed real interest rates lower and caused the U.S. Dollar Index to fall below 100, enhancing the attractiveness of dollar-denominated silver. Historically, a 1% decline in the dollar typically corresponds to a 1.5%-2% rise in silver prices, while the opportunity cost of holding silver simultaneously decreases. High debt levels in developed economies and a perceived weakening of dollar credit have prompted central banks to increase allocations to gold and precious metals. Silver benefits alongside gold from this asset revaluation.

Supply-Demand Fundamentals: Surging Industrial Demand and a Persistently Widening Supply Deficit

• Demand Side: Photovoltaics (PV) is the largest consumer of silver. Global PV silver demand reached 7,560 tonnes in 2025, accounting for 55% of total demand and doubling from 2022 levels. Demand from sectors like new energy vehicles and AI servers also grew simultaneously, with industrial demand increasing by 13% year-on-year in 2025.
• Supply Side: The global silver market has been in deficit for five consecutive years, with a shortfall of approximately 3,660 tonnes in 2025. In 2026, China implemented a "case-by-case review" system for silver exports. Given that China supplies 60%-70% of the world's refined silver, this further tightened supply expectations. Moreover, 70%-80% of silver is produced as a by-product of copper, lead, and zinc mining, making it difficult for primary silver mine capacity to expand rapidly. Strikes in major producing countries and declining ore grades exacerbate supply rigidity.
• Inventory Side: Approximately 80% of LBMA inventories are locked up by ETFs or are considered ineffective for the physical market. Inventories in key markets like the Shanghai Futures Exchange (SHFE) are at historically low levels. This physical scarcity fuels expectations for squeezes and price increases.

Geopolitics and Capital Flows: Rising Risk Aversion Coupled with Speculative Sentiment Amplifies Volatility
Geopolitical events, such as the U.S. military action in Venezuela, triggered safe-haven buying. In the first week of January, spot silver accumulated gains of 9.72%, with single-day increases exceeding 6%. Data shows that speculative net-long positions in COMEX silver remain at high levels. Inflows of capital reinforce the wealth effect, and despite the CME Group raising margin requirements three times (the latest increase in January was 28.6%), speculative enthusiasm has not significantly cooled.

Policy and Structural Factors: Strategic Attributes and Short-Term Catalysts
Silver's inclusion in the U.S. Critical Minerals List has fueled market expectations for increased strategic stockpiling demand. China's export control measures have intensified global supply tightness. While 44 companies have obtained export qualifications, the "case-by-case review" system increases global circulation costs. Short-term volatility has been triggered by factors such as futures delivery and index rebalancing (e.g., the Bloomberg Commodity Index reducing its weighting for precious metals). However, supported by strong fundamentals, capital has quickly flowed back, driving prices higher against the trend.