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ToggleSupply anxieties in the global commodities market are rapidly spreading to the silver sector. Widely used in jewelry, electronics, electric vehicles, solar panels, and as a safe-haven investment, the supply-demand imbalance of silver has reached a point that cannot be ignored. According to a recent Reuters report , a study released this Wednesday (15th) by the World Silver Institute and consulting firm Metals Focus indicates that the silver market is facing its sixth consecutive year of structural deficiency .
Prices have fallen 35% from their all-time highs, but the shortage continues to widen.
Looking back at the market's frenzied performance, silver experienced a dramatic surge of 147% in 2025, fueled by strong demand for physical silver and an influx of funds into US exchange-traded products (ETPs), reaching an all-time high of $121.6 in January 2026. Although prices have since fallen by about 35% as retail investor euphoria has cooled, the underlying supply and demand fundamentals remain tight.
The report shows that since 2021, the market has drawn a staggering 762 million ounces of silver from its inventories. Looking ahead to 2026, while global demand is projected to decline slightly by 2%, global silver supply is also expected to decline by 2%. This will cause the global silver market shortage to widen further from 40.3 million ounces in 2025 to 46.3 million ounces .
Shifting Demand Structure: Industrial Slump Leads to a 18% Surge in Real Investment
Metals Focus's report provides a detailed breakdown of the supply and demand structure changes expected in 2026:
- Industrial and jewelry demand declines: Industrial silver production is projected to fall by 3%, a four-year low, dragged down by the impact of the Iran war on global economic growth, and faces the risk of further decline.
- Demand for safe-haven assets surges against the trend: In stark contrast to the sluggish industrial sector, global physical investment demand for silver coins and bars is expected to grow by 18% , strongly supported by a recovery in US buying.
Metals Focus warns: Liquidity short squeeze risk looming
The continued depletion of inventory makes the market extremely vulnerable to liquidity shortages. Last October, the London benchmark market experienced a liquidity squeeze due to a surge in physical demand.
Philip Newman, Managing Director of Metals Focus, pointed out that as of the end of March, approximately 28% of the 884 million ounces of silver held in London vaults were not tied to ETPs and could be used to support market liquidity (this proportion is higher than the historical low of 17% during the short squeeze last September). Therefore, liquidity has indeed improved recently, and London rental rates have largely returned to normal.
However, Newman issued a serious warning that the market must not be complacent: "The risk of another liquidity squeeze this year remains." He emphasized that if silver price volatility intensifies, demand in the Indian market picks up again, and funds from ETPs holding metals in London flow back in, it will force inventories to flow further out of the United States, and the perfect conditions for a "silver short squeeze" storm will form again.
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