Multiple structural factors have converged in real time: persistent supply-demand gaps, declining global inventories, and resilient industrial demand in key sectors. These developments have created a visible imbalance in the physical market, even as benchmark prices try to catch up.This trend is supported by shrinking inventories at major vaults and exchanges, coupled with signs of tighter availability in key manufacturing regions. This environment has driven buyers, both institutional and industrial, to acquire physical silver, widening the gap between paper contracts and actual delivery.
Here’s what might make prices higher:
Structural shortage and declining stocks
Silver has been suffering from a structural shortage for several years, with demand generally exceeding supply. According to industry reports, the global silver market is expected to remain in deficit through 2025, with projected shortages on the order of more than 100 million ounces.
This shortage is difficult to bridge quickly. Most silver is produced as a byproduct of copper, zinc and lead mining, which limits supply flexibility. Ore grades are also reportedly declining, and new mines typically take more than a decade to become operational. Meanwhile, inventories in COMEX, London vaults and Shanghai have steadily declined in recent years, reinforcing concerns about tightening physical availability. Although exact figures vary, the decline in inventories is clearly visible in all major storage centres.
Industrial demand remains strong
Silver continues to see strong industrial demand, especially in solar panel production, electric vehicles, electronics and medical applications. Estimates suggest that 50-60% of silver demand now comes from industrial use.
Unlike gold, silver’s role in industrial applications is in many cases non-replaceable, especially in the renewable energy and electronics sectors. This adds a layer of fundamental support that has become increasingly important as green infrastructure spending increases globally.
Chinese export controls could further tighten supply
Reports suggest that China could implement export restrictions on silver from January 1, 2026, requiring companies to obtain government-issued licenses to ship the metal abroad. While details are awaited from official sources, the prospect of tighter outbound flows from one of the world’s major players has added a new layer of supply-side concern to the market.
What lies ahead for the silver price?
According to Justin Khoo, Senior Market Analyst at VT Market, the rally in silver so far is not purely euphoric, but based on both macro stress and structural demand.
He notes that concerns about fiscal sustainability, persistent inflation expectations and demand for real assets have all supported silver’s move. Furthermore, industrial exposure to silver, especially in energy transition and electronics, has created a demand that gold does not have.
Khoo emphasizes that the sharp decline in the gold-silver ratio earlier this year indicates a catch-up phase rather than a speculative surplus. However, he does note that silver’s higher beta means that short-term corrections are likely, especially after a steep rise. These should be viewed as consolidations unless fiscal or inflation risk declines significantly.
For 2026, Khoo expects silver prices to trade in a wide range of $48-70 per ounce, with possible expansions to $75 if monetary easing accelerates or industrial demand surges.
Also read: Is it too late to buy silver after a 150%+ run in 2025? Rich Dad Poor Dad author Robert Kiyosaki answers
(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times)
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