Is silver in short supply? The answer is yes. And, it’s part of why, as of this writing, silver is trading over $100 per ounce, up 230% since January 2025.
The supply challenge even meant that when London’s silver vaults had shortages, some traders shipped silver via air freight instead of ocean shipping to meet demand. While air freight costs more, the shortage makes it worth the premium.
This article covers what’s happening with global production and consistent demand for this white metal that’s driving higher price gains.
Understanding silver’s dual role
Silver is different from other precious metals because it has industrial uses in addition to its role as a store of value. Investors buy gold mainly for wealth preservation, but silver is also used in manufacturing and technology.
“Short supply” in the silver market means demand exceeds what’s available from mining production and recycled materials.
Silver’s three-pillar demand structure
Here are the key uses that drive the silver market:
- Industrial uses (59-60% of demand): Growing demand comes from electronics manufacturing, photovoltaic cells (solar panels), AI chip components, electric vehicle batteries, conductive adhesives, and advanced circuitry.
- Investment purposes: Safe-haven asset allocation, portfolio diversification, inflation hedging, and price volatility speculation.
- Traditional applications: Jewelry, decorative ornaments, silverware, and heritage collectibles.
Silver market changes
Silver demand has changed significantly in recent years. In 2014, solar panel production used about 5% of global silver consumption. By 2025, the overall energy transition happening worldwide increased it to 14%, or roughly 160-180 million ounces annually.
The silver market is about one-tenth the size of gold’s market, which makes it more volatile. In 2025, total global demand reached 1.12-1.2 billion ounces, with industrial uses making up the largest portion.
Historical price volatility
Silver has experienced three major price spikes in the past 50 years. In January 1980, speculative trading drove prices higher. The 2011 U.S. debt ceiling crisis caused another spike as investors sought safe-haven assets. October 2025 marks the third significant price surge.
These events show silver’s price volatility. Silver supply is tightening, not becoming more abundant.
Silver vs gold
Silver and gold are both safe-haven assets, a store of wealth, and a way to preserve purchasing power from the effects of inflation. Investors often hold both. In fact, in 2025, 48.5% of Swiss America’s sales were silver and 51% were gold.
Here’s a comparison of these two metals:
| Aspect | Silver | Gold |
|---|---|---|
| Market size | About 1/10th the size of gold market | Larger, more established market |
| Primary use | Industrial (59-60% of demand) | Store of value |
| Industrial consumption | Consumed permanently in manufacturing | Mostly stays in circulation |
| Price volatility | High – called “Cinderella metal” | Lower, more stable |
| Supply | 70-71% byproduct of other mining | Primarily mined as primary product |
| Investment role | Affordable precious metal, higher risk/reward | Safe-haven asset, wealth preservation |
Physical silver inventory challenges
Besides supply challenges, there are also export restrictions from major producing countries that have created silver price differentials between regions.
Global inventory depletion across major hubs
| Location | Status as of late 2025 | Impact |
|---|---|---|
| London vaults | Down 1/3 to ~22,000 metric tons | Lowest in years; critical supply hub compromised |
| Shanghai Exchange | Hit 2015 lows | Asian demand pressure mounting |
| COMEX | Tightening with lease rates above 5% | Extreme scarcity premium emerging |
| LBMA eligible stocks | Shrank to ~155 million ounces (4,821 tonnes) | Physical supply severely limited |
These supply constraints are affecting delivery times and costs:
- Delivery delays: The Royal Mint experienced delays of at least two weeks for silver orders in 2025.
- Borrowing costs: Overnight borrowing rates reached 200% annualized in October.
- ETP allocations: More than half of the silver supply is held in exchange-traded products and unavailable at current spot prices.
- Circulation: Unlike gold, silver gets consumed permanently in solar panels and electronics manufacturing.
- Dealer inventory: Decreased as wholesalers face longer procurement times and higher costs.
- Lease rates: Stayed above 5% throughout 2025, compared to historical levels near zero
The Silver Institute estimates the supply-demand imbalance to continue through 2026 and beyond.
Production realities: why supply can’t keep pace
Global mine production of silver reached approximately 813-835 million ounces in 2025. This is down from the 2016 peak of nearly 900 million ounces. Silver production has constraints outside of typical market forces that we see with other precious metals.
Silver mine output breakdown (2025)
| Production type | Percentage of total | 2025 output | Key constraint |
|---|---|---|---|
| Byproduct (copper, lead, zinc, gold) | 70-71% | ~570-595 Moz | Dependent on host metal economics |
| Primary Silver Mines | 28-29% | ~227 Moz | Declining ore grades and closures |
| Recycling | Minor | 13-year high | Cannot close structural deficits |
About 70-71% of global silver comes as a byproduct of copper, lead, and zinc mining. This means silver mining depends on the production cycles of these primary metals.
When silver has sharply higher prices, it doesn’t always increase production because miners focus on optimizing output for their primary metals, not silver. This creates a supply ceiling that doesn’t respond quickly to price changes.
Global mine production has been declining, with output peaking in 2016 and further declines attributed to lower ore grades in major producing countries like Mexico, Peru, and China.
- Peru: The country faces declining production amid operational closures and regulatory pressures.
- Mexico: Output climbs toward 186 million ounces through mine restarts. However, Mexico has ongoing labor strikes and tightening environmental regulations that threaten sustainability.
- China: Represents 60–70% of global refining, giving it outsized influence over downstream supply chains, so restrictions on exports add to the distress in Western markets.
- Recycling: Hit a 13-year high in 2025, but still cannot cover the widening deficit.
Silver ore grades have declined over time, which increases mining costs. Environmental regulations and geopolitical issues have also disrupted operations.
The outcome is a decade-long production decline with minimal new capacity development anytime soon. Mining companies can’t quickly scale silver output because they’re essentially harvesting it as a secondary product.
Demand surge: the forces driving consumption
Total silver demand reached approximately 1.12-1.2 billion ounces in 2025, with industrial applications accounting for 59-60% of this volume.
Industrial demand
Solar panel production is the largest growth driver. In 2025, photovoltaic demand ranged from 194-246 million ounces. By 2030, this could reach 250-300+ million ounces annually.
Different panel types use different amounts of silver:
- TOPCon panels: Require 13 mg/W, HJT panels need 22 mg/W.
- PERC: These traditional panels use 10 mg/W.
Manufacturers reduced the amount of silver in products by about 20% in 2024, with potential cuts of 15% in 2025. Despite these efficiency improvements, record solar installations keep overall silver demand high.
Other industrial uses include:
- Electric vehicles: Standard EVs use 25-50 grams, but emerging solid-state silver batteries could demand over one kilogram per unit.
- Artificial intelligence: Silver is an essential component in high-performance processors and data center infrastructure.
- Electronics manufacturing: There’s a continuous baseline demand across consumer devices and industrial equipment.
Investment demand
Investment demand for silver increased in 2025. Geopolitical tensions, trade disputes, economic uncertainty, and a weaker dollar drove more investors toward precious metals. In April 2025, trade policy exempted gold and platinum as critical minerals but excluded silver, which further tightened the market.
Meanwhile, China has reclassified silver as a strategic material, implementing export controls that can restrict global supply. And the country’s decision to tighten silver export controls is a big change in global commodity strategy.
The deficit reality: five years of shortfalls
The silver market experienced its fifth consecutive year of supply deficits in 2025. The cumulative deficit from 2021-2025 totals approximately 820 million ounces. This is equivalent to an entire year of global mine production.
Persistent deficits since the early 2020’s
Here’s how the deficit started and continues to grow:
| Period | Estimated deficit | Market impact |
|---|---|---|
| 2021-2024 (Cumulative) | ~725 Million oz | Inventory depletion at major hubs |
| 2025 | 95-120 Moz (conservative); up to 300 Moz (high estimate) | Fifth consecutive year of shortage |
| 2026 projection | Expected to continue | Limited new mine supply additions |
Market tightness and future supply risks
Supply responses remain inadequate. New mine development takes 7-10 years from discovery to production. Recycling can’t close the demand gap. Researchers are exploring copper and aluminum as substitutes for silver in some applications, but silver’s superior conductivity remains irreplaceable for critical uses.
You can see the demand pressure in countries like India. As the world’s largest silver consumer at approximately 4,000 metric tons annually (80% from imports), Indian buyers shifted from gold to silver during Diwali 2025 following strong monsoons and harvests. This drove silver prices in India to a record 170,415 rupees per kilo, up 85% year-over-year.
The silver supply outlook: what lies ahead
Supply for this industrial metal is tightening for several reasons.
Key drivers of supply stress
The pressure points on silver’s global output are:
- Structural deficit: Annual shortfalls with limited production response capacity.
- Byproduct dependency: 70% of silver supply is tied to the economics of other metals, constraining independent supply decisions.
- Inventory depletion: London, Shanghai, and COMEX stocks at multi-year lows, reducing buffer capacity.
- Industrial demand floor: 59-60% of consumption for non-discretionary applications in renewable energy, electronics, and manufacturing.
- Limited recycling: Industrial uses consume silver permanently. Recycling can’t meet demand.
Price growth and market dynamics
Some analysts predict record-high silver prices if supply constraints continue. But silver is known for volatility. The metal is sometimes called the “Cinderella metal” because prices can rise and fall quickly. Market turbulence, changes in AI demand, or cryptocurrency selloffs could affect silver prices.
Impacts for stakeholders
For everyone that relys on silver, the impact of the supply challenges means:
- Investors: See upside potential with silver bars and coins, but should be aware of silver’s volatility.
- Industrial buyers: May need to secure supply contracts or consider stockpiling.
- Solar manufacturers: Will likely continue efforts to reduce silver usage per panel.
Final thoughts on silver’s supply squeeze
Silver supply constraints are creating market conditions that investors should understand. With industrial demand growing, mine production stagnant, and physical availability tightening, the fundamentals point to continued supply-demand imbalances.
If you’re considering adding silver to your portfolio, connect with the Swiss America team to learn more.
Is silver in short supply? FAQs
Will the silver price go down in 2026?
No one can predict silver prices with certainty. The metal is known for volatility, which means prices can move up or down quickly. Several factors could affect silver prices in 2026:
- Industrial demand
- Mining production levels
- Investment demand
- Global economic conditions
- Supply constraints
Current supply-demand imbalances are likely to continue, but market conditions can always change. If you’re considering silver as an investment, it’s best to consider it as a long-term tangible asset.
Is there an endless supply of silver?
No. Silver is a limited resource. In fact, the U.S. Geological Survey added silver to its list of critical minerals in November 2025. The reason we have a deficit is:
- Increased demand: Silver demand is exploding, but the world cannot produce enough to match it, creating a supply squeeze that many experts believe will last for years.
- Ongoing shortfall: The silver market has been running a supply shortfall for several consecutive years, and that imbalance shows no signs of resolving in 2026.
- Regulatory hurdles: Increased environmental regulations and long permitting timelines make it harder to quickly develop new silver mines, which can take 5 to 10 years.
What will silver do if the dollar collapses?
If the dollar loses significant value, silver usually rises in price because it takes more dollars to buy the same amount of metal. Precious metals like silver and gold often serve as a hedge when currency values decline because:
- Intrinsic value: Silver has intrinsic value independent of any currency.
- Genuine scarcity: Unlike fiat currency, supply is limited by geology.
- Industrial demand: Continues regardless of dollar strength.
- Universal acceptance: Can be sold globally in any currency.
The information in this post is for informational purposes only and should not be considered tax or legal advice. Please consult with your own tax professionals before making any decisions or taking action based on this information.
