Silver hits an all-time high on low inventories

Supply–demand balance

Supply:

Since 2021, the global silver market has consistently recorded a supply deficit, primarily due to rapid growth in renewable energy capacity, especially demand from photovoltaic (PV) solar panels.

Annual silver supply remains relatively steady at around 1,000 million ounces (Moz), with more than 80% originating from mining and the remainder largely from recycling. The largest producing countries are Mexico (6,300 tonnes/year), China (3,300 tonnes/year), and Peru (3,100 tonnes/year).

Silver is predominantly produced as a by-product, which means supply is extremely price-inelastic. Roughly 72% of mined silver globally comes as a by-product of lead, zinc, copper, and gold operations. This implies that even if silver prices were to rise to 100 USD/oz, output would not increase meaningfully unless demand for the parent metals (such as copper and zinc) also strengthens. As a result, when speculative capital flows into silver, the upside potential tends to be much greater than for base metals, whose supply can be adjusted more flexibly.

Depleting reserves and operational slowdowns at major mines in Mexico and Peru could further exacerbate supply tightness. Recycling has increased to around 6% of total supply, primarily from jewelry and scrap, but remains insufficient to offset structural deficits.

Demand:

Total (EPA:TTEF) silver demand has exceeded supply almost every year since 2020. Industrial demand—estimated to account for around 58% of total demand in 2024—has been the key driver.

Demand from the solar sector alone grew 122% between 2021 and 2024, reaching nearly 200 Moz per year, pushing industrial demand higher at a CAGR of 7.3%.

Although the silver load per PV panel is expected to gradually decline due to technological improvements, emerging sectors such as electric vehicles (EVs) and data centers are projected to offset these reductions and keep overall industrial demand elevated. Automotive silver demand is expected to reach nearly 90 Moz in 2025.

Figure 1: Physical silver supply–demand balance

Source: Silver Institute, Exness Investment Bank

Exchange shortages fuel investment flows

Investment flows have been the most important catalyst behind silver’s sharp rally in recent months.

Physical inventory squeeze and pre-festival buying:

Silver stockpiles at the London Metal Exchange (LME) have been depleted by exceptionally strong festival-related buying in India. As gold prices surged, a large segment of investors and consumers rotated into physical silver, leaving exchange inventories insufficient to back futures contracts. India’s silver imports doubled to 225 Moz in 2024, and the trend has continued into 2025.

This shortage triggered a large transfer of inventory from China to Europe, with more than 660 tonnes in October alone, pushing exchange inventories in China (SGE, SHFE) to 10-year lows. Spot prices in Shanghai have been trading above futures (a backwardation structure), a classic signal of acute physical tightness.

Figure 2: Silver inventories on SGE and SHFE

ETPs inflows gaining momentum:

Exchange-traded products (ETPs) inflows have risen steadily since 2024, reinforcing silver’s status not only as a safe-haven asset but as a strategic alternative to other precious metals.

The Gold/Silver ratio reached above 106:1 in April 2025, the highest level in five years, reflecting gold’s outperformance relative to silver. Since then, the ratio has fallen sharply to around 73–74. Although still above the historical average range of 65–69, this decline has allowed silver to catch up—and even outperform gold—in 2025.

At the same time, uncertainty over tariffs, signs of cooling in the U.S. labor market, and continued geopolitical risks have encouraged investors to rotate into safe-haven assets. These conditions support elevated silver prices and sustained net inflows into silver-backed ETPs.

Figure 3: Consensus forecasts

Source: Company data, compiled by Exness Investment Bank

Outlook

In summary, the combination of structural physical deficits fueled by industrial demand and tight physical markets, along with stronger investment flows into silver-backed products amid global uncertainty, has underpinned silver’s strong price performance.

Major institutions continue to view silver as a compelling investment with meaningful upside potential into 2026. Consensus forecasts suggest the Gold/Silver ratio could continue to normalize toward the 65–68 historical average range, implying the possibility of average silver prices in the $65–70/oz range in 2026.