The price of silver declined on Monday, pulling back from its highest levels since 2011, as the US dollar strengthened and renewed trade tensions between the United States and its key trading partners weighed on investor sentiment. The retreat followed US President Donald Trump’s announcement of steep tariff threats on imports from Mexico and the European Union, actions that rattled global commodity and currency markets.

Spot silver dropped as much as 0.8% during US trading hours, trading at $38.23 an ounce as of 4:13 p.m. in New York. The decline follows a recent rally that saw the metal briefly rise above $39 an ounce — its highest level in nearly 14 years — driven by tightening physical supply and increasing investor demand. Silver, like most globally traded commodities, is priced in US dollars. As the greenback strengthened — with a dollar index rising 0.2% — silver became more expensive for investors using other currencies, reducing its appeal in foreign markets. This inverse relationship between the dollar and silver is a key dynamic in the precious metals market.

The stronger dollar coincided with a surge in geopolitical and economic uncertainty, including President Trump’s tariff threats aimed at long-standing trading partners. Over the weekend, Trump declared new tariffs of 30% on imports from Mexico and the European Union, warning that the duties would take effect on August 1 unless both regions agreed to renegotiate trade terms. The threats marked an escalation in tensions that have simmered throughout 2025.

Supply Pressures Mount

Silver’s recent surge above $39 an ounce was partly fueled by signs of strain in the physical market. According to data compiled by Bloomberg, the cost of borrowing silver for one month — a measure known as the implied lease rate — has surged to over 6% annually. This compares with a typical near-zero rate, suggesting tightening supply conditions.

One contributing factor to the market’s tightness is the accumulation of physical silver in exchange-traded funds (ETFs), particularly in London, a major storage hub. Since February, silver-backed ETF holdings have grown by approximately 2,570 metric tons, limiting the volume of metal available for lending or direct purchase.

The squeeze in physical supply has helped drive silver’s price rally in 2025. The metal is now up 32% year-to-date, outperforming gold, which has risen by 27% over the same period. Market participants have attributed silver’s strength to a combination of investor demand, trade uncertainty, and its use in industrial applications, particularly solar technology.

Trade Uncertainty Impacts Key Producer

Mexico, the world’s largest silver producer, is at the center of the latest trade dispute. The country, which plays a critical role in supplying silver to the US, is facing a proposed 30% tariff on a wide range of exports. Although the current version of the US-Mexico-Canada Agreement (USMCA) excludes silver from the new levies, market participants remain concerned that exemptions could be revoked or renegotiated as tensions escalate.

Some traders have expressed uncertainty over whether the exclusion will hold, noting that previous trade negotiations have included last-minute changes to sector-specific protections. The prospect of reduced Mexican exports to the US, even temporarily, could further tighten the silver market.

Silver-Gold Ratio Narrows

The silver-to-gold ratio, a key metric used by investors to assess relative value, has narrowed in recent months as silver outperformed. Currently, it takes approximately 86 ounces of silver to purchase one ounce of gold, down from higher levels earlier in the year. However, the ratio still remains above the 10-year average of 80, suggesting that silver remains relatively undervalued in historical terms.

Both metals declined slightly on Monday, with gold, platinum, and palladium all registering modest losses alongside silver. Analysts continue to monitor macroeconomic indicators and geopolitical developments for signs of further volatility.

Deficit Projected for Fifth Consecutive Year

According to the Silver Institute, the global silver market is expected to remain in deficit for the fifth straight year in 2025. Demand for the metal has remained robust across both investment and industrial sectors. In particular, the transition to renewable energy technologies has sustained demand for silver in solar panel production.

The ongoing imbalance between supply and demand has reinforced bullish sentiment among some investors, even as short-term price movements reflect broader financial market conditions, such as currency fluctuations and geopolitical developments.

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