For a market that saw prices cut in half from January’s peak, silver is behaving anything but predictably. The grey metal is caught between a hawkish Federal Reserve, a solar industry racing to ditch it, and a technology boom that can’t get enough of it. The result is a supply deficit that almost every forecaster agrees will stretch into a sixth consecutive year — even if they can’t agree on its size.
At $68.91 per ounce on 18 June, silver had clawed back 1.5 percent on the day but remained roughly 6.5 percent weaker on the month. The sell-off accelerated mid-week after the Fed signalled growing support for interest-rate hikes. That pressure has wiped out nearly half the metal’s rally from its January high of $121, a stunning retreat in what was shaping up to be a breakout year.
The fundamental picture, however, remains anything but bearish. According to the latest World Silver Survey, global consumption will outstrip supply by around 46 million ounces in 2026. Other market watchers put the gap as high as 67 million ounces. Either way, demand has now exceeded production for six straight years, drawing down inventories by roughly 762 million ounces since 2021 — the equivalent of an entire year’s global mine output.
Part of that deficit is self-inflicted by the solar industry, which had been silver’s fastest-growing customer. Sky-high prices pushed the metal’s share of cell costs above a fifth, forcing manufacturers into aggressive thrifting. Longi Green Energy, Jinko Solar and Shanghai Aiko Solar Energy are increasingly replacing silver with copper pastes. Longi plans mass production as early as the second quarter of 2026, and Aiko is already selling silver-free cells. Yet the substitution remains technically fraught — high-temperature processes in TOPCon cells tolerate alternatives poorly, and reliability issues with pure copper pastes have delayed mass adoption. After a noticeable drop last year, solar’s silver consumption is expected to fall further to around 151 million ounces in 2026.
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What the solar sector sheds, the electronics and infrastructure industries are absorbing. Data centres powering artificial intelligence, high-speed transmission hardware and automotive electronics are all guzzling the conductive metal. These new demand centres are filling orders faster than analysts anticipated at the start of the year, offsetting the solar retreat and keeping total industrial consumption from collapsing.
The cumulative effect of years of deficits is visible in physical markets. In London vaults, the share of unencumbered silver fell to a historic low of 17 percent in September 2025. The following month, a physical liquidity crunch sent lease rates sharply higher. Supply is growing — global output is forecast to rise 1.5 percent to 1.05 billion ounces in 2026, a decade high, while recycling is expected to add 200 million ounces for the first time since 2012. But because most silver comes as a by-product from gold, copper and zinc mines, higher prices do little to boost primary production.
On the investment side, the correction is drawing in bargain hunters. Physical investment demand is set to leap 20 percent to 227 million ounces in 2026, a three-year peak. Jewellery and silverware demand, by contrast, is expected to slide 9 percent and 17 percent respectively.
The gold-silver ratio currently sits at about 62, a level that historically has not signalled overvaluation. J.P. Morgan Global Research sees an average price of $81 per ounce for 2026 — more than double last year’s average. Whether that forecast materialises depends largely on how aggressively the Fed tightens in the coming months. For now, the market is pricing in a structural squeeze that no single policy move can easily unwind.
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