The global silver market could remain undersupplied for a sixth consecutive year despite a fading demand. The latest report from the Silver Institute shows a 2% decline owing to high prices pressuring the key consumption segment.
Still, the organization expects the structural deficit to widen to 46.3 million ounces at 1.1 billion demand.
From Industry to Investment
Higher prices are the primary driver of demand decline. On the consumer side, jewelry fell by 8% in 2025, and the Institute expects the trend to continue. India remains a particularly exposed market, as record prices erode affordability. Silverware demand remains under pressure, even at a four-year low.
Meanwhile, industrial demand, the largest consumer of silver, is also softening. After 4 years of growth, it declined by 3% in 2025. The Institute expects it to continue falling in 2026 as solar panel manufacturers look to reduce silver use or find ways to fully replace it.
The solar weakness has outweighed supportive trends in other sectors such as electric vehicles, data centers, and power infrastructure.
Still, as average prices rise, investment demand provides an important counterbalance. Coin and bar demand rose by 14% in 2025 and is expected to jump a further 18% in 2026. Ongoing geopolitical uncertainty and macroeconomic risks continue to drive strong investor appetite for precious metals.
Supply growth remains constrained. Higher output in Latin America drove global mine production by 3% in 2025, but expectations for 2026 remain broadly flat.
Production faces grade-related and operational pressures across key production regions. Meanwhile, cartel-related incidents in Mexico (the largest individual producer) aren’t helping the cause. Although recycling remains a promising growth alternative, it faces capacity constraints, limiting its ability to offset other areas.
Short-Term Impact and Long-Term Outlook
This persistent deficit is already having visible effects. Falling above-ground inventories, significant metal movement between trading hubs, and a late-2025 liquidity squeeze all contributed to significant price volatility.
iShares Silver Trust (NYSE:SLV) is up 9.26% year-to-date.
However, a recent J.P. Morgan report lists risks to demand.
“Long term, the largest risk we see for silver comes from more widespread adoption of silver-free technology,” Gregory Shearer, the bank’s head of base and precious metals strategy, warned.
He added that the recent price surge has likely already triggered “a meaningful acceleration in substitution and thrifting trends,” which could weigh on demand over time.
However, Shearer noted that these structural changes will not happen overnight, meaning investment flows and market sentiment will remain the dominant drivers in the near term.
Image via Shutterstock
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