Market Shortage Will Continue to Support Silver Prices

Silver has lagged behind gold in price gains this year as investors seek protection from geopolitical tensions, trade wars and recession risks. However, industrial demand for silver remains strong and a large market deficit is expected this year, which will support the price going forward.

On Wednesday, the Silver Institute released its latest report, the 2025 Silver Survey, which predicts that the silver market will be in deficit for the fifth consecutive year. Admittedly, the deficit will be the smallest in four years, but it is still significant.

A report by Metals Focus forecasts a deficit of 117 million ounces. Demand will be 1,148 million ounces, and supply will increase by 1.5 percent due to increased mine production.

Industrial demand remains essentially unchanged from last year at 677.4 million ounces. Silver demand is growing in the automotive, power grid and electronics sectors, while it is decreasing slightly in the solar panel sector.

The price of silver has been extremely volatile in recent months. While gold has risen 27 percent this year, silver has only risen 13 percent. The main reason for the underperformance is investor concerns about the global economy – namely, a potential recession would significantly affect industrial demand for silver.

The gold to silver price ratio has risen to more than 100. We have only seen this level once before in history – in the spring of 2020, when the corona crisis began. The price ratio is currently moving very similarly to the one preceding the crises of 2008 and 2020, which you can read more about here . It could also culminate in an extremely good buying opportunity for investors this year.

The Deficit Will Support Prices Going Forward

Philip Newman, director of Metals Focus, told Kitco that after five years of deficit, the market is nowhere near rebalancing. “We believe the deficit will continue for several more years and that should provide some momentum to prices, although there could be some short-term volatility.”

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Although some countries have slowed the transition to green energy, Newman says it is unlikely that green goals will be completely abandoned globally.

“It could be argued that governments can reduce spending on green energy, but many remember how volatile oil prices can also become. So there is still a motive to reduce dependence on fossil fuels,”

said Newman.

At the same time, silver is also supported by the electrification of the global economy. “The strength of the silver market is diversification. Even in a recession, I don’t think demand will fall off a cliff. There are always risks, but I see more strength in the silver market right now,” Newman explained.

The potential for industrial demand to be hit by a recession has held silver back somewhat this year. But Newman says that is not deterring investors from the market, quite the opposite. Metals Focus estimates that investment demand will increase by 14 percent, or 70 tonnes, this year.

An Economic Downturn Could Bring Many Investors Back into the Market

Newman said investors may start buying silver during a recession because it is another safe haven asset to invest in, alongside gold. Metals Focus expects demand for silver coins and bars to rise 7 percent this year, to 204 million ounces.

“Demand for coins and bars is expected to recover after two years of weakness. In Europe, a recovery could take place, led by Germany,” the analysts wrote in the report.

Newman said silver’s underperformance has disappointed investors, but some see it as an opportunity, as the price ratio between the two metals has risen to a historically high level. It is currently over 100, compared to an average of around 60 over the past century.

Since silver, like gold, has large above-ground reserves, the deficit is currently being covered by those reserves. But like gold, those reserves are limited and higher prices are needed to make the metal more attractive to the market, Newman said. He believes investors who have bought the metal are expecting prices well above $35.

Although silver may be facing several negative factors this year, analysts at Metals Focus believe that silver still has room to rise

“We believe there is still room to rise. We believe that in the coming months we will see new cyclical peaks that exceed the 2024 peaks. At some point, silver will catch up with gold in terms of performance as investors realize that silver is undervalued relative to gold,” the analysts said in the report. “However, this may not happen in 2025, as silver reserves are still abundant and investors are mainly betting on gold, the price of which has increased sharply.”