The narrative around silver is quietly fracturing. While a brief dip in the US dollar helped the metal claw back more than two percent on Monday to hit $77.72, deeper currents are pulling the market in opposite directions. The familiar appeals to supply deficits and geopolitical tension are being countered by two structural shifts that analysts are only now fully pricing in: a dramatic reduction in solar-industry demand and a sharp downgrade of the global shortfall by UBS.
Solar manufacturers have begun to rewrite the demand equation. After a six percent drop in 2025 to 186.6 million ounces, the industry’s silver appetite is forecast to slip further to around 151 million ounces next year. The culprit is not a temporary inventory cycle but a deliberate push to reduce silver content per cell. Thrifting programs are accelerating, and alternative metallization routes are leaving the lab. Longi Green Energy Technology plans to commercialize rear-contact cells using copper instead of silver, with mass production slated for the second quarter of 2026. Jinko Solar is scaling up copper-based panel output, and Shanghai Aiko Solar has already launched silver-free cells commercially. A cornerstone of silver’s demand story — photovoltaics — is wobbling.
The Swiss bank UBS has responded in kind. Instead of the 300 million ounces of global supply deficit originally penciled in for this year, its analysts now see a gap of at most 70 million ounces. Weakness in both the solar and jewellery sectors, combined with persistent ETF outflows, drove the revision. UBS trimmed its year-end price target to $80 per ounce, tacitly admitting that the metal’s upside is now capped as long as China’s industrial engine stutters and interest rates stay elevated.
China’s latest data underscore the fragility. Industrial production rose only 4.1 percent year-on-year, and retail sales eked out a meager 0.2 percent gain. Since the country is a heavyweight buyer of silver for industrial applications, the slowdown is hitting physical flows directly. A partial offset from a 11.5 percent order increase in Germany’s electrical industry barely moves the needle.
Geopolitical turbulence in the Persian Gulf adds another layer of complexity but, so far, not a sustained bid for silver. The Strait of Hormuz remains effectively closed to commercial traffic, moving just four percent of normal volumes. Iran announced the creation of a “Persian Gulf Strait Authority” to control shipping and charge fees, while barring Israeli and US vessels. The US Central Command has rerouted 85 commercial ships and is blockading Iranian ports. Yet the metal has not rallied on safe-haven flows the way gold has. Why? Because the same disruption is fanning inflation expectations, which erode the appeal of zero-yield assets. US 10-year Treasury yields climbed to 4.63 percent, a 15-month high, making fixed-income instruments more attractive.
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Inflation readings are tightening the Fed’s leash. Producer, import and export prices all accelerated in April at the fastest pace in years. Markets now price no rate cut from the Federal Reserve in 2025, and some traders are even betting on a hike by December. That raises the opportunity cost of holding silver and compounds the headwind from the solar shift.
Citi analysts expect a resolution of the Hormuz standoff by the end of May, but any delay or partial reopening would keep inflationary pressure alive. A quick de-escalation would at least remove one source of macro drag, but it would not restore the demand lost to copper substitution in solar cells.
The market is not entirely without support. Silver is on track for its sixth consecutive annual deficit, with the shortfall estimated at roughly 46 million ounces by different sources. Supply remains sluggish because around 70 percent of silver is mined as a byproduct of copper, lead and zinc — miners cannot simply crank up output. The LBMA survey for 2026 shows an average forecast of $79.57 per ounce, though the range is exceptionally wide at $42 to $165, reflecting deep uncertainty.
The next directional impulse will depend less on central bank gold buying or classic haven narratives and more on the procurement lists of solar module makers and the timing of Fed policy. With both factors currently leaning bearish, the deficit alone is proving insufficient to lift silver out of its rut.
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