Summary of this article
Silver futures hit a historic high of Rs 2,59,692 per kilogram on the MCX, gaining 9 per cent in the first week of 2026.
The rally is fueled by a US-Venezuela geopolitical conflict and a major supply shock following China’s new export licensing regime for silver.
Rising demand from AI data centers and solar industries, coupled with a five-year supply deficit, continues to support high prices.
After a stellar surge in 2025, silver prices have extended gains at the start of 2026, too. The precious metal has gained over 9 per cent within the first week of the new calendar year. On January 7, 2026, silver prices surged to a fresh record high on the Multi Commodity Exchange (MCX).
Silver Futures with March 5, 2026 expiry gained 0.34 per cent to trade at an all-time high of Rs 2,59,692 per kilogram. In the first week of 2026, silver futures have already rallied nearly 9 per cent. At the time of writing, silver futures were trading slightly lower around the Rs 2,55,218 levels, down by Rs 3,593 or 1.39 per cent on account of likely profit booking following the surge.
On the COMEX, silver futures with March 26 expiry surged nearly 2 per cent over the previous close to trade at $82.585 per ounce. However, at the time of writing, silver futures dipped to $79.155 per ounce, down by $1.884 or 2.32 per cent. In India, physical silver prices surged by nearly 3.95 per cent to an all-time high of Rs 2.63 lakh per kilogram on January 7. In the first week of the calendar year, the price of physical silver has risen by 10.04 per cent to its all-time high.
Why Are Silver Prices Rising
The rise in silver prices is being driven by both recent triggers, such as the US-Venezuela conflict, and several long-term triggers, such as a supply-side deficit. Here’s a look at some of the key factors which have contributed to silver’s near 9 per cent rally in the first week of 2026:
Safe Haven Demand
The rally seen in silver prices followed the escalation of conflict in South America following the capture of Venezuelan President Nicolás Maduro by the US military on January 3, 2026. The event prompted a risk-off sentiment across the globe. The risk-off sentiment is likely to have increased the demand for safe haven assets, such as gold and silver. Immediately after the arrest, silver prices witnessed a jump of 4.30 per cent on the MCX, amid risk of a wider regional conflict.
Kaynat Chainwala, AVP - Commodity Research, Kotak Securities told Outlook Money that spot silver surged to record highs in the international market on the back of safe haven flows.
"Spot silver surged above $81.40/oz yesterday on safe-haven inflows after the U.S. capture of Venezuela's president spiked geopolitical uncertainty. Silver's more than 6 per cent surge can also be attributed to China's silver export controls, which risk worsening the physical squeeze and Trump's threats to resource-rich nations like Greenland, Cuba, and Mexico following strikes on Venezuela, underscoring intensifying competition for critical resources," Chainwala said.
China’s Export “Chokehold”
The new calendar year began with a new supply side shock for silver. On January 1, 2026, China enforced an export licensing regime for silver. According to the World Silver Survey 2025, China is the most major refiner of silver globally, accounting for nearly 65 per cent of the silver refinery. The export licensing regime has led to a locking in of silver’s supply from China within its borders. This supply side shock has had a ripple effect causing a supply squeeze in London and New York.
The AI & Solar Industrial Boom
Amid the supply squeeze, the demand for silver from several industries is expected to increase. The structural shift in demand for silver from traditional industries to new-age industries, such as AI data centres and renewable energy has also led to the price rise for the precious metal. According to a report by bullion retailer, Bullion Exchanges, silver’s conductive properties make it indispensable for several industrial applications, such as the development of AI systems which rely on silver-based high-density circuit boards and memory chips. Additionally, the adoption of electric vehicles also spurs the demand for silver. Renewable energy adoption is also expected to impact silver demand, as the metal is used in solar energy photovoltaic cells that use silver paste.
The 5-Year Supply Deficit
The demand for silver is also underpinned by a five-year supply deficit, with cumulative shortfalls of nearly 820 million ounces equivalent to a full year of global mine production being missing from the world’s stockpiles. According to the World Silver Survey 2025, the market has consistently “eaten into” inventories to sustain the demand for the metal.
“The price upswing builds on a broader rally that has been in place since last year, driven by a structural supply demand imbalance marked by constrained mine output and rising industrial usage. Today, silver eased from $82.7/oz and currently trades below $80/oz, as traders look ahead to U.S. jobs data for clues on monetary policy following December FOMC minutes suggesting officials remain divided on timing and scale of rate cuts,” Chainwala said.
Relatively Weaker Dollar
The expectations of sustained interest rate cuts in 2026 by the US Federal Reserve have further weakened the dollar. A weakening dollar makes silver cheaper for global buyers, adding to the demand.
Gold-Silver Catch-Up
In early 2025, silver was considered undervalued compared to gold. However, post silver’s rally towards the end of 2025, retail and institutional investors are catching up. Silver began to outperform gold by a significant margin leading to the Gold-Silver Ratio (GSR) reducing, with gold gaining to 76.50 per cent in 2025, closing near Rs 1.33 lakh per 10g.
Silver surged nearly 183 per cent in the same period, closing around Rs 2.40 lakh per kg by the year-end. The GSR measures how many ounces of silver are required to purchase one ounce of gold. By January 2026, the ratio has dropped to nearly 60:1, indicating silver’s outperformance over gold.
Chainwala urged investors considering to buy the precious metal, to wait for further dips and initiate staggered buying as opposed to purchasing in lump-sum.
"Given silver's inherent volatility from its dual precious-industrial role, and the bullish medium-term outlook from strategic supply risks and potential policy disruptions, staggered buying on dips is suggested," Chainwala said.
