(Kitco News) - A slowing economy is taking its toll on silver’s industrial consumption, with demand expected to fall by 4%; however, demand won’t fall enough to reset the current imbalance in the marketplace.
Last week, the Silver Institute reiterated its outlook that silver will see its fifth annual supply deficit of 95 million ounces. Although the deficit is significantly less than last year’s, analysts noted that it is still enough to support prices at record highs.
Although silver has twice been unable to hold gains above $54 an ounce, the selling pressure has been limited. Spot silver last traded at $50.75 an ounce, and prices are up nearly 76% so far this year.
While industrial demand has been weak, the survey shows that investment demand has more than made up for the drop. Philip Newman, Managing Director at Metals Focus, the British research firm behind the annual Silver Survey, said that inflows into exchange-traded funds (ETFs) have increased by 187 million ounces so far this year.
“This reflects investor concerns over stagflation, the Federal Reserve’s independence, government debt sustainability, the US dollar’s role as a safe haven, and geopolitical risks. Silver’s exceptional price performance and its favorable supply-demand backdrop have further reinforced investor confidence,” Newman said in his note.
Looking beyond investment demand, industrial consumption is expected to fall to 665 million ounces this year, down 2% from last year.
“This reflects the impact of global economic uncertainty stemming from tariff policies and geopolitical tensions, as well as a more rapid pace of thrifting due to soaring silver prices. In photovoltaics (PV), global installations are set for a new record high. However, due to a sharp drop in the amount of silver used in each module, PV silver demand is forecast to ease by around 5% y/y,” the report said.
Metals Focus wrote in the updated report that they expect silver jewelry and silverware demand to decline by 4% and 11%, respectively, this year.
Finally, silver bar and coin demand is expected to fall by 4% to a seven-year low of 182 million ounces.
“This is a result of weakness in the US market, which is offsetting gains in the other key markets of India, Germany, and Australia. Despite a recent uptick in US demand, for much of 2025, the US has had to contend with sizable retail investor liquidations. In contrast, Indian investors have bought into rising local prices, expecting further upside in 2025,” the report said.
The silver market has seen significant supply chain disruptions this year, as physical metal has been trapped in the wrong location and in the wrong form. At the start of the year, significant amounts of silver flowed into the US as bullion banks and other market players built a stockpile to avoid potential tariffs.
Although the US government has said that precious metals, including silver, are exempt from tariffs, the metal has remained in New York due to concerns it could still face import taxes, as it has also been declared a critical metal.
New York vaults are overflowing with silver, and refiners are at capacity when it comes to recycling the metal. Buyback premiums for scrap silver are significantly lower in North America because of the glut.
Meanwhile, in London, growing demand from India and rising investment demand in ETFs have created significant tightness in the local marketplace, driving lease rates to record highs. Although some metal has flowed back into London chasing higher premiums, analysts note that silver will continue to face supply chain challenges as supply struggles to keep up with demand.
In an interview with Kitco News, Matthew Piggott, Director of Gold and Silver at Metals Focus, said there are expectations for silver to experience annual supply deficits for the foreseeable future.
He added that global consumption would have to fall significantly to rebalance the market.
Metals Focus expects silver prices to rise to $60 an ounce in 2026.
