Silver Futures Surge To Lifetime High On MCX, Know What’s Driving The Rally

MCX Silver Futures: Silver prices witnessed a strong surge on December 1, 2025. The MCX Silver contract with March 26, 2026 expiry surged over 2 per cent over its previous close to record on the MCX of Rs 1,78,649 per kg. Notably, the gains seen in today’s session followed momentum in the previous sessions. The contract has rallied for the past seven sessions.

Silver’s rally came amid a rise in the price of spot silver, backed by the US Federal Reserve’s interest rate cut, weakness in the dollar index, and an increase in demand for safe haven assets, along with several other factors.

Why Are Silver Prices Rising

The price of silver has risen significantly in the international market. At the time of writing, Silver was trading at $57.2365 per ounce, up by 1.47 per cent. Earlier today, the price of the precious metal surged 2.60 per cent to a record high of $57.8745 per ounce. Notably, the upward momentum seen in the international market translates directly to a price rise in the Indian market. Here’s a look at some of the key factors driving the rally in silver prices.

US Federal Reserve Rate Cut Expectations

The rise in silver prices follows a similar rally in gold prices, amid increasing market confidence and expectations that the Federal Reserve (Fed) will cut interest rates in the near future. According to the Fedwatch tool, interest rate traders are expecting an estimated 85-87 per cent probability of a Fed rate cut.

A potential rate cut is likely to reduce the strength of the dollar and decrease the opportunity cost of having non-yielding assets, such as silver increasing its attractiveness for investors. Prathamesh Mallya, deputy vice president - research, non-agri commodities and currencies, Angel One, said that a combination of factors is driving the rally in silver prices.

“Silver rally in 2025 is a combination of a host of factors ranging from industrial demand, green energy and technology, supply constraints and shortages, investment demand, and speculative flows in the commodity,” Mallya said.

Silver Supply Deficit

The silver market has been in a continuous supply deficit. In a supply deficit, the demand perpetually exceeds the available supply of a commodity. The demand for silver has remained strong due to its usage across industries.

On the other hand, the supply side is constrained, as 70-75 per cent of the world’s silver is not mined from dedicated silver mines, according to a report by Discovery Alert, a commodity price tracking platform. This results in an inelastic supply and high demand, which is likely to have led to the rally.

The availability of silver is also shrinking, as inventory hubs, such as London Vaults have seen a shrinkage. The US government has also declared silver as a ‘critical mineral’.

Rising Industrial Demand

The shrinkage in silver’s supply has been coupled with an increase in the demand for silver across industries. The rising adoption of clean energy has increased the demand for silver, as it is used in solar panels, semiconductors, 5G devices and printed circuit boards. The metal is also used in EV batteries and other electronic components.

Santosh Meena, head of research at Swastika Investmart, said that the supply deficit is the primary driver of the rally in silver prices.

“While rate cuts help, the primary driver is the physical supply deficit. Explosive demand from the solar (PV cells) and EV/AI electronics sectors is stripping inventory faster than mines can produce it. It is no longer just a precious metal trade; it is an industrial necessity trade,” Meena said.

Weaker Dollar

Since silver is traded in dollar, weakness in the currency makes dollar-denominated assets cheaper for holders of other currencies. This, in turn, is likely to have boosted international demand and subsequently pushed silver prices up.

So far, in 2025, the Dollar Index, which measures the strength of the dollar against a basket of other currencies is currently trading around the 99.29 level, down by 0.17 per cent. The index has declined 6.69 per cent year-to-date (YTD).

Safe Haven Demand For Silver

The year 2025 has been fraught with geopolitical conflicts, as tensions between Russia and Ukraine continue to remain high, and the economic uncertainty increases. Amid high volatility and rising uncertainty, investors turn bullish on safe-haven assets such as silver.

What Should Investors Do?

Amid the rally in silver prices, new investors and existing investors should both factor in the prices and act accordingly. Meena urged new investors to avoid relying heavily on the momentum and advised them to take limited exposure, since the precious metal is already trading at its lifetime high.

“While the long-term structural story remains intact, entering at an all-time high (ATH) is psychologically difficult and statistically risky for a new position. If you have nil exposure, buy 20-30 per cent now to avoid “fear of missing out”. Keep the remaining 70 per cent cash ready to deploy aggressively during any sharp correction,” Meena said.

On the other hand, Mallya urged investors who missed the first leg of the rally to wait for a reduction in silver prices before taking a fresh position in silver. He advised investors to look out for corrections close to $50 per ounce in the international market.

“For a long-term investor who missed the initial leg of the rally, the current price levels look overpriced, and it would be better to wait for a meaningful correction towards $50/ounce in the international markets and Rs 1.40 lakh per kg in the Indian markets,” Mallya said.

Mallya added that investors should not hold more than 15 per cent of their combined portfolio in gold and silver cumulatively.

“For a diversified portfolio, it is advisable to hold 10-15 per cent of one’s portfolio combined (silver-gold). However, for Indian investors, the exchange-traded fund (ETF) space in silver is a relatively new product; hence, divesting in silver via digital modes of investment and penetration and liquidity in the products will take its own sweet time,” Mallya said.