Silver ETPs Soar 78% as Fed Rate Cut Bets Meet Supply Crunch

Precious metals are rallying decisively ahead of the December Fed meeting, with silver delivering standout performance. The white metal has surged over 21% since November 21 alone, driven by massive ETF inflows, depleting global inventories, and near-certain expectations of monetary easing. Despite a 2.3% pullback to $57.14 on December 4 as traders booked profits, the underlying momentum remains strong.

Why Silver Is Breaking Out

The rally accelerated dramatically after Federal Reserve officials signaled a December rate cut, with probability spiking from 24% to over 87% in under two weeks. This policy pivot has weakened the US Dollar Index from 100.40 to near 98.92, creating ideal conditions for dollar-denominated metals.

More critically, silver faces severe physical tightness. Global ETF holdings reached 839.54 million ounces—a cycle high and the strongest since July 2022—after rising 20 million ounces since November 21. Meanwhile, COMEX inventories have dropped 7.3% since October as metal was relocated to address London shortages. Chinese inventories are at multi-year lows, with Shanghai Futures Exchange stocks down 62% from February levels. The LBMA 1-month lease rate, though down from October's extreme 35%, remains elevated at 5.7% versus a historical 0.3-0.5%, indicating ongoing scarcity.

Supporting Cast: Gold Holds Strong Amid Mixed Data

Gold maintains strength above $4,200 despite mixed US economic signals. While weekly jobless claims fell to a 3-year low of 191,000, private sector employment unexpectedly dropped by 32,000 jobs in November—the worst decline since 2023. Platinum continues its 80% YTD advance amid South African supply constraints, while palladium benefits from new Chinese futures contracts.

2026 Outlook: Cautious but Constructive

The convergence of Fed easing, inventory depletion across Western and Chinese exchanges, and strong ETF accumulation creates a supportive backdrop. Investors will monitor today's PCE inflation data and next week's JOLTS report ahead of the December 10 Fed decision, where a 25-basis-point cut is widely anticipated.

Analysts anticipate the Fed may deliver a "hawkish cut," combining easing with cautious guidance for 2026. Institutional forecasts project gold trading between $4,400-$4,900 next year, with silver ranging from $50-$65, though near-term targets suggest potential for $62-$65 in coming weeks. The platinum market may reach approximate balance after three deficit years.

ETF Performance

European silver ETPs have captured this move with dramatic outperformance. The silver ETF segment (17 funds, $14.5B AUM) gained 4.84% last week, bringing year-to-date returns to 77.55%, significantly ahead of gold ETFs' 45.15%.

Key performers include:

• iShares Physical Silver ETC (ISLN): +7.37% weekly, +78.45% YTD
• WisdomTree Physical Silver ETC (PHAG): +7.36% weekly, +77.97% YTD
• Xtrackers Silver EUR Hedged (XAD2): +94.66% YTD

Flow data reveals tactical positioning. While PHAG attracted $23.1 million in weekly inflows, ISLN saw $51.1 million in outflows, indicating profit-taking during the consolidation. Overall, the precious metals ETF category recorded $147 million in net weekly inflows.

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Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.