Silver prices hit record high amid dwindling demand
Silver hit multiple record breaking highs last year, but soaring investor appetite ultimately offset demand for the metal from jewellers and industry.
Silver rode the coattails of fellow precious metal gold which was coveted for its ‘safe haven’ status, and has extended its rally into 2026.
The asset has surged 140.9 per cent over the past year, and is currently trading at $45.30 per ounce, but the ongoing high prices have damaged demand and caused a liquidity crunch.
Overall demand fell by two per cent year-on-year to 1.1bn ounces (Boz), after weakness in both the industrial and jewellery market, according to the latest survey from the Silver Institute.
Industrial demand for silver fell three per cent to 20,446 tonnes, after gains made from the expansion of data centres and other infrastructures, was damaged by a downturn in photovoltaic use, including in solar panels, as rising prices led manufacturers to look for alternatives to the asset.
Silver jewellery declined eight per cent to 5,889 tonnes, the lowest levels since 2021, as record high prices eroded affordability and curbed retail demand, including in India and Italy.
In contrast coins and bars saw a surge in demand, rocketing 14 per cent, across all markets bar the US, creating a liquidity squeeze.
Investment in India soared 33 per cent, while demand also picked up “dramatically” in East Asia and the Middle East.
Demand outlook
Industrial demand is forecast to continue falling in 2026 to 19,894t, while ongoing high prices will continue to damage the jewellery sector, pushing it to a five year low of 4,957t.
But coin and bar demand is anticipated to grow by 18 per cent, driven by western markets, in particular the US which is set to “recover significantly after four years of losses which saw demand collapse”.
Europe is also expected to see gains, led by demand in Germany, where silver investment is seeing a rising share of retail activity, while smaller gains are expected in India off the back of record high rupee prices.
Silver production
Silver mine production rose three per cent last year to 846.6 Moz, primarily driven by higher by-product output from copper operations in Peru and an acceleration of production in Russia.
But output in North America tumbled to its lowest level in 10 years, while Asia production dipped one per cent.
Output from gold and copper operations also increased five per cent and six per cent respectively, but supply is ultimately to be harmed by weak output in regions including Argentina, which is mining low grade ores.
Production is also expected to “remain flat” in 2026 as the problem of low grade ores and operational pressures in key regions persists.
The Silver Institute also acknowledged the strain of the Middle Eastern conflict on short-term outlook, but emphasised that the current “macroeconomic and geopolitical backdrop” remains supportive for silver prices assuming the conflict remains contained.