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Silver prices have punched through $60 per ounce for the first time amid a historic rally driven by a scarcity of supply and a surge in demand from investors.

The metal has more than doubled in price since January, as years of undersupply, compounded by strong demand from industrial users and investors, led to shortages and a severe supply squeeze in October.

Silver jumped 4 per cent on Tuesday to reach $60.4 per ounce, a fresh record high. Gold also rose 0.7 per cent to reach $4,216 per troy ounce, slightly below the record set in October.

This week expectations of a rate cut by the US Federal Reserve, which meets Wednesday, have boosted precious metals.

“In the very near term, the focus is on the Fed rate meeting,” said Suki Cooper, analyst at Standard Chartered.

“Underlying the move is the fact that we have a market that has been undersupplied for the past five years, and we still have regional stocks dislocation,” she added.

Silver is used in jewellery and coins, but demand has also boomed for industrial uses, such as in electronics and solar panels.

Unlike gold, silver is mainly produced as a byproduct of other minerals, so miners have not been able to easily respond to the rising demand in recent years.

In recent months, a huge stockpile of silver has built up in the US, as a result of fears of potential US tariffs on silver, compounding a shortage elsewhere.

Although the stockpile has started to dwindle slightly in recent weeks, silver inventories on the Comex are still about 456mn ounces, three times their historic average.

The US is expected to publish its Section 232 review on critical minerals in coming weeks, which may outline fresh commodity tariffs, including potentially on silver.

This year the US added silver to its list of critical minerals. The country is already a significant silver producer.

“Whilst the market is in deficit, we expect regional tightness to persist,” said Helen Amos, commodity analyst at BMO, pointing out low stocks in China.

Retail investors have also chased silver higher, particularly in North America, where the metal is often referred to as the “poor man’s gold”, Amos added.