According to the annual World Silver Survey released by the Silver Institute, as the silver market is expected to see a significant supply gap, investors should prepare for volatility intensifies and potential liquidity issues in the silver market for the remainder of this year.
According to the survey conducted by UK-based research firm Metals Focus, the silver market is expected to see its sixth consecutive annual deficit, with a shortfall of 46.3 million ounces. This highlights how years of undersupply have been steadily eroding above-ground inventory, leaving the market highly vulnerable to fresh bouts of fluctuations.
Although supply remained relatively stable — mine production is expected to be basically flat and recycling volume rose to a multi-year high — it was not enough to meet demand. As a result, the persistent deficit has steadily reduced available inventory, making the market increasingly sensitive to demand shifts and investment flows.
Philip Newman, Managing Director of Metals Focus, said in an interview that the latest survey showed the silver market is increasingly driven by investment flows, macroeconomic uncertainty, and tightening liquidity.
Although Metals Focus remains optimistic about silver's trajectory heading into 2026, the report noted that the outlook is not without risks. Uncertainty in the global economy due to escalating geopolitical tensions and ongoing turmoil in the Middle East could dampen industrial demand for silver.
Industrial demand for silver is expected to decline 3% this year to 639.6 million ounces, marking the second consecutive annual decline. However, Newman noted that despite the decline, the sector remains at historically strong levels and well above pre-conflict levels, underscoring silver's critical role in various modern technologies.
Growth Drivers
The report noted that the weakest segment of industrial consumption this year had been its biggest growth driver. Analysts expect silver consumption in the PV sector to decline 19% this year, as rising prices have forced manufacturers to reduce silver usage in PV panels or seek alternative materials.
Newman added that substitution pressures had emerged before silver prices reached extreme levels. He noted that the rapid rally over the past year was a key factor forcing manufacturers to make adjustments.
Despite headwinds facing PV sector demand, Newman said the resilience of industrial consumption stems from more diversified application fields. He explained that demand from data centers, broad electrification of the global economy, and EV manufacturing are all sources of growth in silver consumption.
While industrial demand faces headwinds, Newman believes investment demand has once again become a driver of the broader market. Newman said: "You could see losses in the industrial sector being offset by retail investment. That's not beyond the realms of possibility."
A Significant Shift
One of the most significant shifts in the silver market is the growing influence of investment demand, particularly retail purchases and exchange-traded products (ETPs).
Following record inflows in 2025, ETP holdings are expected to increase again. Metals Focus expects global ETFs to see modest net inflows of approximately 30 million ounces; however, Newman said this small net increase masks dramatic fluctuations underneath. He noted: "Given the massive liquidations we've already seen this year, that's quite a significant swing compared to where we are now."
Beyond flows, ETFs are having an increasing impact on the physical market. Large inflows remove metal from circulation, causing available supply tightens and triggering a liquidity squeeze; while outflows rapidly release metal back into the market, amplifying price fluctuations.
The survey highlighted that demand for silver coins and bars is expected to grow 18% in 2026, reaching the highest level since 2022. Meanwhile, physical demand remains a key pillar of the market, with strong buying interest helping to tighten supply conditions, particularly during periods of strong price momentum and market stress.
Indian Market Far from Saturated
Newman noted that physical demand has shown resilience globally, but he emphasized that India remains one of the most important markets for silver. Even at elevated prices, strong retail purchases, limited selling, and steady seasonal demand continue to support global consumption.
He added that Indian investors have shown a greater willingness to hold silver rather than take profits on rebounds, which has intensified tightness in the physical market and limited available supply.
Meanwhile, Newman said that while higher silver prices may affect total investment volumes, they are not expected to undermine overall demand. He predicted: "I think you're going to see a significant increase in spending from retail investors. "
Looking ahead, Newman expects Indian demand to continue serving as a key support pillar for silver. Despite demand reaching a record high in 2025, Newman believes the Indian market is far from saturated. He said: "Looking at the purchasing levels we've seen, I don't feel the market is becoming saturated. If we get another good monsoon season, this year could be another positive year."
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