Conditions Are Ripe for More Positive Returns in Precious Metals in 2026

Conditions are ripe for more positive returns in precious metals during 2026. Silver is a precious metal that sells for around $90 per ounce. Unlike its close sibling gold, it's extremely useful in industrial applications, which soak up almost half of its available supply each year. Silver's price soared by 144% during 2025 on fears that China's latest export restrictions could trigger a global supply shortage. However, like gold, it was also in demand from investors who were hedging against a rise in political and economic uncertainty, driven by elevated inflation, soaring U.S. government spending, and a record high in the national debt. The iShares Silver Trust (SLV) is an exchange-traded fund (ETF) that directly tracks the price of silver. Investors can buy it through most major stock trading platforms, so it's a good alternative to buying physical metal, which often comes with storage and insurance costs. Could it deliver another barnstorming return in 2026? Here's what history says. Ideal conditions for further upside in precious metals Silver is quite abundant for a precious metal, with around eight times more of it pulled out of the ground each year compared to gold. However, gold relies on its status as a store of value -- which dates back thousands of years -- to fuel demand from investors, whereas silver is far more practical. In 2024, around 58% of silver demand was attributed to industrial applications like electronics manufacturing, and a further 18% came from the jewelry industry. Investors, on the other hand, were responsible for just 16% of total demand. Since silver has become a staple in so many industrial settings, supply shocks can trigger significant spikes in its value, as was the case last year. China is the world's second-largest exporter of silver behind Hong Kong, and toward the end of 2025, it announced new restrictions on how much metal producers could ship out of the country. The restrictions took effect on Jan. 1, 2026. China is trying to protect its domestic supply chains because it's one of the world's largest manufacturers of electronics, but these new restrictions also give the country additional leverage in trade negotiations with other economic superpowers like the U.S. But like most real assets, silver also benefits from the depreciation of paper currencies. The U.S. used to operate under the gold standard, which meant the government could only print more money if it had an equal amount of physical gold to match. However, this mechanism was abandoned in 1971, leading to an explosion in money supply and a subsequent 90% decline in the purchasing power of the U.S. dollar. Therefore, any asset priced in U.S. dollars has experienced a material increase in its perceived value. Data by YCharts. The U.S. government ran a $1.8 trillion budget deficit in fiscal 2025 (ended Sept. 30), propelling the national debt to a record high of $38.5 trillion. Another trillion-dollar deficit is in the cards during fiscal 2026, and investors are increasingly worried that the only way the government can resolve this fiscal situation is by increasing the money supply to devalue the U.S. dollar even further. Therefore, they are flocking to precious metals like silver as a hedge. History points to lower returns for silver in 2026 The bull case for precious metals certainly remains intact, but investors who are expecting another triple-digit percentage gain in silver might want to manage their expectations. Over the last 50 years, it has delivered a compound annual return of just 5.9%, which is a far more realistic target for 2026.