Precious metals advanced sharply in early European trading on Friday, with silver leading gains as investors sought safety amid renewed geopolitical friction and a decline in U.S. Treasury yields. The rally pushed silver firmly above the $80 per ounce threshold, a significant technical and psychological level for the industrial and monetary metal.
Price Action and Market Drivers
Spot silver surged 2.8% to trade at $80.57 per ounce by late morning in Europe. Gold, the traditional haven asset, posted a more modest gain of 0.7%, reaching $5,032.49 per ounce. Platinum and palladium also moved higher, each adding approximately 2.3%. The move in precious metals coincided with a notable drop in U.S. government bond yields, which reduces the opportunity cost of holding non-interest-bearing assets like bullion.
Analysts pointed to escalating tensions between the United States and Iran as a primary catalyst for the flight to safety. "Yields are down, reducing the opportunity cost of holding bullion," noted Peter Fertig, an analyst at Quantitative Commodity Research. This dynamic has placed silver in a unique position, oscillating between its roles as a perceived store of value during times of uncertainty and a key industrial commodity sensitive to interest rate expectations and economic growth forecasts.
Dollar Strength and Underlying Demand
Notably, the rally in silver occurred alongside a strengthening U.S. dollar, which typically exerts downward pressure on dollar-denominated commodities by making them more expensive for foreign buyers. The dollar index was on track for a weekly gain of about 1.1%, its strongest performance since October, fueled by robust U.S. economic data, a less dovish-than-expected Federal Reserve, and the same geopolitical concerns boosting metals.
"You can sort of see why the dollar’s managed to bounce," commented Dominic Bunning, head of G10 FX strategy at Nomura. The fact that silver advanced despite the headwind of a firmer dollar is interpreted by market participants as a clear signal that safe-haven buying is currently the dominant force behind the price increase, overpowering typical currency-related influences.
Solar Sector Feels the Squeeze
The sustained rally in silver is creating significant cost pressures for the solar energy industry, a major consumer of the metal. The sector accounts for roughly 196 million troy ounces of annual demand, representing about 17% of global silver consumption. With prices having jumped approximately 130% over the past year, manufacturers are accelerating efforts to find substitutes, primarily copper, to mitigate soaring input costs.
"Silver is the greatest contributor to the increased cost of manufacturing solar panels," stated Derek Schnee, a senior commercial solar consultant at JK Renewables. Specific cost impacts are becoming severe. Ben Damiani, Chief Technology Officer at Cherry Street Energy, estimated that U.S. silver-paste costs for a standard 450-watt solar module have skyrocketed to around $17.65, compared to just $5.22 at the beginning of 2025. In response, major manufacturers like China's LONGi have announced plans to commence mass production of base-metal (copper) technology between April and June 2026.
Focus Turns to U.S. Economic Data
Market attention is now squarely focused on a batch of high-impact U.S. economic data scheduled for release at 13:30 GMT. The December Personal Income and Outlays report, which includes the Federal Reserve's preferred inflation gauge—the core Personal Consumption Expenditures (PCE) price index—will be published alongside the advance estimate for fourth-quarter Gross Domestic Product (GDP).
Traders will scrutinize these figures to gauge whether the U.S. economy remains resilient and inflation persistent, a combination that could keep the dollar in demand and potentially push bond yields higher. Such an outcome would likely dampen appetite for precious metals. Conversely, softer data could alleviate some of the upward pressure on yields and the dollar, potentially extending the metals' rally. Any de-escalation in Middle East tensions over the weekend could also temper the immediate safe-haven bid.
The trading session sets the stage for a volatile finish to the week, with silver's trajectory hinging on the interplay between geopolitical headlines, currency movements, interest rate expectations, and hard economic data from the world's largest economy.
