Silver's 15% Rally in 2016: The Rise, Fall, and What Really Drove It

Silver had quite the rollercoaster ride in 2016. The precious metal kicked off the year trading below $14 per ounce and ended it around $15.88—a solid 15% climb by year’s end. Not bad, but here’s the thing: silver actually peaked above $20 during the year, meaning that final number only tells half the story. For those tracking iShares Silver Trust (SLV), the gains looked impressive on paper until the late-year selloff erased roughly 50% of the peak-to-trough swing.

The Two-Part Rally That Wasn’t

Silver’s 2016 can be split into two distinct moves. The first leg up was brutal: from January through April, the metal sprinted from $14 to above $18, driven by a perfect storm of factors. Stock markets were tanking (oil had cratered below $30 per barrel), China was showing cracks in its economic armor, and investors were spooked enough to hunt for safety. On top of that, the Federal Reserve wasn’t hiking rates as aggressively as people feared. After the December 2015 rate bump, the Fed went radio silent for most of 2016, which meant holding precious metals cost less in terms of opportunity cost.

Then came Brexit in June. The U.K. vote to leave the EU sent shockwaves through currency markets and made investors even more anxious about global stability. Silver looked like a solid store of value when everything else seemed uncertain. Price momentum built to the point where silver touched above $20 per ounce—a psychological level that had traders genuinely convinced we’d see $25 before 2017 arrived.

When the Bull Lost Steam

But $20 silver was a mirage. By December, the price had collapsed back below $16, erasing most of the year’s gains from the peak. What changed? The U.S. economy started looking stronger. After the initial post-Brexit panic, American stocks rocketed higher, eventually pushing the Dow toward 20,000. That economic confidence made investors rethink their safety trades. When the U.S. presidential election shock wore off, equities exploded higher while safe-haven assets like silver cratered.

The final nail was rising rate expectations. As economic data strengthened, markets started pricing in actual Fed rate hikes (which did happen in December). Higher rates make precious metals less attractive since they don’t pay yield. Combine that with profit-taking on the 50% rally and increased scrap supply from higher prices, and silver had nowhere to go but down.

The 2017 Question Mark

Heading into 2017, silver faced real headwinds. Technical traders saw deteriorating price action, market sentiment across stocks and bonds was bullish (bad for silver), and rate hikes looked inevitable. That said, geopolitical chaos or a macro shock could flip the script fast. If things got weird globally, silver could claw its way back toward $20. But for most of 2016, the silver price story was about the gap between hope and economic reality—and reality won.