The Silver Supercycle Explained: Why MCX Silver Crossed ₹3 Lakh and What Comes Next

By 4 min Read Jan 20, 2026

Silver Breaks ₹3 Lakh A Historic MCX Milestone (2)

MCX silver crossed ₹3 lakh amid a global supercycle driven by supply deficits, geopolitical risks, Fed rate cuts, weak rupee, and rising industrial demand from AI and solar.

Silver on MCX crossed above the ₹3 lakh mark for the first time on 19 January 2026 and, during the morning session on 20 January, is currently trading near ₹3.15 lakh, while COMEX silver touched USD 94 per ounce. In just 19 days since the start of the year, silver prices have risen by over 31%, following an exceptional rally in 2025 that ranks among the strongest annual performances in recent decades. This surge has been accompanied by a sharp increase in volatility. Since the beginning of 2026, the average daily trading range of MCX Silver has expanded to 11,528, underscoring the intensity of price action and heightened market participation.

YTD	2025	2024	2023	2022	2021
31.64%	170.20%	17.20%	7.23%	10.78%	-8.00%

Why Is Silver Rallying So Strongly?

Silver’s strength stems from its dual identity as both a precious metal and an industrial metal, allowing it to benefit from multiple macro and structural forces simultaneously.

Rising Geopolitical Tensions
Silver continues to assert its role as a monetary metal during periods of global uncertainty. Recent diplomatic friction between the United States and Europe related to the Greenland proposal has unsettled markets. Proposed tariffs of 10% from February, potentially rising to 25% by June, have added to policy uncertainty. At the same time, the Russia–Ukraine conflict remains unresolved, while renewed tensions between the U.S. and Iran have added fresh geopolitical risk. This elevated uncertainty has reinforced safe-haven demand for silver as a hedge against geopolitical and policy instability.

Fed Cutting Interest Rates:
The U.S. Federal Reserve has shifted decisively toward monetary easing after policy rates peaked in the 5.25%–5.50% range, the highest in nearly two decades. Cumulative rate cuts of around 175 basis points have brought rates closer to 3.75%. Lower interest rates are supportive for silver, as declining real yields reduce the opportunity cost of holding non-yielding assets. Looking ahead to 2026, markets are pricing in expectations of at least two more rate cuts, which could further strengthen silver’s macro backdrop.

Weaker Rupee:
A structurally weaker Indian Rupee has emerged as a major tailwind for domestic silver prices. Since the start of 2026, USD/INR has breached the 91 level, driven by persistent FII outflows and global trade uncertainty. For Indian investors, this effectively acts as a price multiplier. Even during periods of consolidation in COMEX silver, MCX prices tend to remain resilient. Domestic participants are benefiting from two simultaneous drivers: rising global silver prices and rupee depreciation, together amplifying returns.

Weaponization of Silver Trade:
China’s decision to introduce stricter export licensing requirements for silver from 1 January 2026 has added a strategic dimension to the ongoing rally. Under the revised framework, silver exports are subject to government approval and are limited to state-approved refiners, effectively increasing regulatory oversight on overseas shipments. This move tightens availability in the global market and reinforces concerns over supply security, particularly during a period of already tight balances.

Strategic Reclassification of Silver in the US:

In November 2025, silver was formally added to the United States Geological Survey’s 2025 List of Critical Minerals, recognizing its essential role in the economy and national security alongside other strategic materials.

Persistent Global Supply Deficit:
The global silver market is expected to remain in deficit for a fifth consecutive year. Global mine production stands at roughly 1 billion ounces annually, while analysts estimate a supply shortfall of around 110 to 120 million ounces this year, as mine output continues to lag rising industrial and investment demand.

ETFs Still in Catch-Up Mode: ETF investment demand in silver is recovering but remains below prior cycle peaks. Holdings in the iShares Silver Trust (SLV) have started to rise again after several years of sustained outflows, indicating a revival in investor interest from the 2024 lows. However, current outstanding shares and total holdings are still meaningfully below the highs recorded in 2021, suggesting that ETF participation has not yet returned to peak-cycle levels. This implies that while investment demand is improving alongside higher prices, silver ETFs are still in a catch-up phase rather than reflecting overcrowded positioning.

Gold Silver Ratio:

The gold–silver ratio (GSR) has broken decisively below the key 50 level. Over the past 25 years, the ratio has averaged close to 70. After briefly spiking to around 107 in April last year, reflecting extreme risk aversion and gold outperformance, the ratio entered a sustained multi-month decline and has since fallen to approximately 49.38, highlighting strong silver outperformance in the current cycle. For historical context, during silver’s peak near USD 49 per ounce in 2011, the gold–silver ratio had compressed further to around 30.

Rising AI and Energy Demand:
The rapid expansion of artificial intelligence is driving a surge in data-center construction, significantly increasing global electricity demand. To meet this requirement, renewable energy capacity, particularly solar power, is being scaled up aggressively. Silver plays a critical role in solar photovoltaic manufacturing due to its unmatched electrical conductivity. While silver is still relatively better compared to its counterparts, any demand destruction from higher prices is likely to occur gradually, as viable substitutes remain economically and technologically constrained. Over the medium to long term, AI-driven power demand is emerging as a structural tailwind, tightening the global silver supply-demand balance further.

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