Key Points
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Silver serves a dual function as a store of value and a crucial industrial metal.
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Now that last year’s silver frenzy has passed, long-term investors might give silver a closer look.
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The biggest risk for silver investors is that manufacturers find substitutes for silver, reducing demand.
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Silver often plays second fiddle to gold in people’s portfolios, but the two work very differently. Like gold, silver acts as a store of value, but it also has many industrial uses, including in solar panels and artificial intelligence (AI) chips. I have a personal interest in silver prices, because when I’m not writing about finance, I’m a hobbyist silversmith, making this precious metal both an investment and a resource for me.
Silver gained almost 150% in 2025, boosted by a mixture of industrial and investor demand. Its price continued to rise in 2026, soaring to a high of $121.64 per troy ounce on Jan. 29 before plummeting by around 27% the following day amid fears that then-Federal Reserve Chair nominee Kevin Warsh would adopt a more hawkish stance.
Now that Warsh has taken up his post and silver is trading around $60 a troy ounce, I think the precious metal could be close to bottoming out.
What’s next for silver?
Two forces are buffeting silver: fears of Fed tightening and a stronger dollar weigh it down, while industrial demand and a multiyear supply deficit pull it up. I predict that prices will rise slightly in the second half of this year and generate further gains in the long term. Spoiler alert? Industrial demand will soon start to outweigh macroeconomic factors.
Inflation, the dollar, and rate increases
Investors often turn to silver and gold to protect wealth when their base currency, such as the U.S. dollar, looks weak. That safe-haven demand was one of the drivers behind last year’s surge, along with speculation, growing industrial use cases, and expectations that the Fed would cut interest rates in 2026. Today, the picture is very different, which is why silver is struggling.
When interest rates are high, precious metals, which don’t generate yields, become less attractive, because investors have a number of relatively safe ways to earn interest on their holdings. That’s weighed on silver’s price this year as the Fed looks for ways to bring stubborn inflation under control and the hoped-for rate cuts look increasingly unlikely.
Silver’s crucial industrial use
Silver’s high electrical and thermal conductivity make it extremely useful in the production of chips, semiconductors, solar panels, electric vehicles, nuclear reactors, and more. Around 60% of silver is used for industrial purposes, and it plays an essential role in several booming industries. It isn’t easy to increase silver production, because the metal is usually produced as a byproduct from mining other metals, particularly copper, rather than being extracted in its own right. As a result, this will be the sixth year of a silver supply deficit — something that looks likely to continue.
Strong demand and limited supply bode well for silver prices, but if prices get too high, manufacturers will seek alternatives — which is already happening in the solar panel industry, where producers have cut silver consumption by about 19% this year. Indeed, one solar maker has just said it will switch to copper completely. However, even as solar manufacturers reduce their silver needs, other sectors, such as AI data centers, consume more, creating a greater industrial appetite for silver.
Is it a good time to buy silver?
Silver prices are down around 50% from their January high and close to an 11-month low, which could make now a good entry point for investors. If you’re considering adding silver to your portfolio, be prepared to hold it for at least five years and know that it could be volatile. Analysts at J.P. Morgan predict that silver will finish 2026 around $80, which feels reasonable — the frenzy that drove silver upwards has faded, and much of the fears around Fed tightening are now priced in. I don’t expect another massive gain, but if industrial demand remains solid, silver could trend upward.
There are a few ways to get exposure to silver, including top silver stocks and silver ETFs. I like the iShares Silver Trust (NYSEMKT: SLV) because it focuses on physical silver, but if you’re looking for a mining stock, consider First Majestic Silver (NYSE: AG), as its mines in Mexico mean silver is more than just a byproduct for the company.
I will be buying both physical silver and silver ETFs in the coming months to diversify with a commodity that also has practical value. I’m not making dramatic moves, and silver will only make up a small percentage of my portfolio, but with U.S. equities close to record highs, I want to rebalance, and silver checks a lot of boxes. And, from a jewelry-making perspective, I want to stock up in case prices spike again.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Emma Newbery has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.
