SILVER MARKET SEEN AS RIPE FOR ANOTHER PRICE SQUEEZE / THE FINANCIAL TIMES

Silver market seen as ripe for another price squeeze

Precious metal hit by huge price volatility and is set for sixth straight year of deficit, according to World Silver Survey

Leslie Hook in London

Global silver demand fell 2% last year, as surging prices triggered a reduction in industrial and jewellery demand © AFP via Getty Images

The global silver market is ripe for another “squeeze” that could send the price soaring, as low stockpiles and six consecutive years of production shortages create the conditions for big moves, according to the authors of a new report.

The precious metal has rocketed to a succession of record highs late last year and early this year — peaking at $121 per ounce in January — but has also suffered sharp plunges in highly volatile trading.

The market is forecast to suffer its sixth straight year of deficit in 2026, with total demand outpacing supply, according to the World Silver Survey, published by consultancy Metals Focus and industry body the Silver Institute.

“The conditions are certainly there for another squeeze,” said Philip Newman, managing director of Metals Focus. 

“We don’t know how long it will last for, but I don’t think it is necessarily all behind us.”

In October last year, strong demand from India as a result of its festive season triggered chaos in the London market and pushed prices to then-record highs above $50 per ounce.

That squeeze was caused in part by low available inventories in London vaults due to years of market deficits combined with strong buying by silver exchange traded funds, which reduced the amount of metal freely available.

While silver prices are often correlated with gold, there are key differences that make silver prices more volatile. 

Silver is not generally held by central banks, so there is no lender or seller of last resort, and more than half of the demand for silver is for industrial applications such as solar panels and electronics, leaving it exposed to fluctuating demand for these products.

Last year, global silver demand fell 2 per cent, as surging prices triggered a reduction in industrial and jewellery demand. 

The fall was particularly pronounced in solar panels, where demand fell 6 per cent, as manufacturers opted for other metals instead of silver due to its high price.

The decline in industrial demand for silver last year more than offset a surge in investment demand, with bar and coin purchases up 14 per cent and net investment in silver exchange traded products tripling, according to the report.

Silver supply rose 7 per cent due to increases in both mining and recycling. 

This was still not enough to meet demand, causing a reduction in global stock levels, although the deficit was smaller than in previous years, according to the report.

“Tightness will not be constant, but liquidity will generally be thinner, lease rates more volatile and price moves likely to be larger than investors have grown used to,” said the report.

Silver’s huge price swings are expected to further damp industrial demand this year.

Solar demand for silver is forecast to drop 19 per cent this year and jewellery demand by 16 per cent, according to the report.

“The high prices of 2026 will prompt silver to subsequently be somewhat the victim of its own success,” it added. Nevertheless, it still forecasts a market deficit of about 46mn ounces this year.