Silver is experiencing strong resonance from its dual attributes: as a commodity, industrial demand now accounts for nearly 60% of total consumption, with emerging sectors becoming the core growth driver; as a financial asset, it moves in tandem with gold amid a globally accommodative liquidity environment, making it a preferred safe-haven option. Over the long term, increasing silver usage in photovoltaics, new energy vehicles, and artificial intelligence is expected to sustain a structural supply-demand gap, providing upward momentum for silver prices. Against the backdrop of rising expectations for Federal Reserve interest rate cuts, a weaker U.S. dollar and improved global liquidity further enhance silver's financial appeal. Coupled with a persistent supply deficit, the ongoing imbalance between supply and demand is anticipated to push silver prices higher. Rising silver prices directly boost profitability for silver mining companies, with resource-based firms owning high-grade silver mines standing to benefit the most.
Key viewpoints from the analysis are summarized below: Short-term inventory fluctuations have led to increased price volatility following significant gains. Global visible silver inventories have shown a declining trend over the past five years, with COMEX inventories continuing to drop in the short term and LBMA inventories falling by approximately 10,000 tonnes from their 2021 peak. Meanwhile, silver inventories in the Chinese market have also decreased to low levels. In the near term, high lease rates in the London silver market indicate potential "squeeze" risks. By 2026, spot silver prices in London breached $118 per ounce, reaching a record high before retreating, reflecting sharp short-term price swings.
Silver possesses both financial and commodity characteristics, with its price direction primarily influenced by financial factors, while its commodity nature provides price elasticity. The gold-silver ratio tends to fluctuate widely but reverts to its historical mean. Since 2000, the average gold-silver ratio has been around 68. Significant declines in the ratio have typically been driven by a combination of loose monetary policies, surges in industrial demand, and capital rotation. During periods of sustained decline in the gold-silver ratio, both metals often rise together, with silver typically outperforming gold by three to four times. In macroeconomic environments characterized by economic recovery or ample liquidity, silver's industrial attributes become more pronounced, offering greater elasticity compared to gold.
Primary silver mine production accounts for less than 30% of total supply, with mining costs rising and supply growth remaining constrained. According to the U.S. Geological Survey, global silver reserves reached 640,000 tonnes in 2024, growing only slowly. Mexico, China, and Peru collectively contribute 50% of global silver production. Most silver is produced as a by-product of copper, lead, and zinc mining, with primary silver mines representing a small share. Growth in mine production has been sluggish due to declining ore grades, limited capital expenditure, and stricter environmental regulations. Recycled silver accounts for less than 20% of supply, indicating limited future growth in silver production.
Silver is an indispensable metal for AI applications, with industrial demand driving increased consumption. According to the World Silver Institute, a structural supply-demand gap has persisted since 2021. Emerging industrial demand from photovoltaics, new energy vehicles, and artificial intelligence continues to grow. Silver's high electrical conductivity, thermal conductivity, and low contact resistance make it strategically important in the AI era. Additionally, against a backdrop of strong precious metals performance, silver's investment demand is positively correlated with price increases, serving as an additional source of demand growth.
Potential risks include fluctuations in the Federal Reserve's interest rate policy, macroeconomic volatility, changes in supply dynamics, and further advancements in silver-reduction technologies.