Why silver is rallying even without Wall Street's support

• Silver is ripping higher — even as futures and ETF investors pull back.
• Chinese buying is propping up prices at levels that may test industrial demand.
• Analysts warn profit-taking could emerge ahead of China's Lunar New Year trading shutdown.

Silver's trailblazing rally has caught some investors by surprise — but Wall Street isn't leading the charge.

Spot silver was trading around $108 per troy ounce early on Tuesday, after pulling back from its record high above $117 per ounce. Prices are up about 50% so far this year — easily outpacing gold's 16% gains.

Some of silver's price strength could be explained by industrial demand from consumers concerned about potential supply shortfalls. However, prices are now approaching levels where that demand — which in a normal year accounts for around 60% of total silver consumption — "could eventually begin to suffer," wrote Ole Hansen, the head of commodity strategy at Saxo Bank, on Monday.

Hansen pointed to Comex and ETF data showing that investors have been net sellers, not buyers, over the past month.

"This leaves retail investment demand for coins and bars, and not least very strong and persistent buying from China," wrote Hansen.

Chinese demand has pushed silver prices in Shanghai to a widening premium over London benchmarks, rising to record highs of more than $14.

"As long as this premium remains elevated, traders and investors elsewhere are likely to feel emboldened in their belief that London and New York prices remain too low," Hansen added.

Speculative retail-investor activity among retail investors in China has helped propel silver to successive record highs in recent weeks. Analysts warn these moves can add volatility.

Silver's rally still has some fundamental support.

The market remains constrained, with the implied lease rate — the cost of borrowing physical silver — still elevated near 3%, according to BMI Research in a Monday note. In a well-balanced market, lease rates would typically hover close to zero.

Silver now "appears expensive" relative to gold, with the gold-to-silver ratio — which measures the ounces of silver needed to buy one ounce of gold — at a four-year low, according to BMI.

"We believe most of the rise in silver over the past week has been due to the same reasons as gold, with speculative buying leading the latest rally," wrote BMI.

Looking ahead, BMI expects silver prices to ease in the coming months as supply tightness improves and industrial demand begins to peak.

A key risk is China's slowing economy. Demand from mainland China's solar industry — one of the largest sources of industrial silver consumption — likely peaked in 2025, BMI added.

Saxo's Hansen also warned of potential risks ahead of the long Chinese New Year holidays next month, when the Shanghai Futures Exchange will be closed from February 16 to 23.

"Should profit-taking eventually take hold, some of that pressure may start to emerge ahead of the Chinese market shutdown," he wrote.