The silver market is showing resilience despite recent volatility and weakening industrial demand, according to research firm Metals Focus. Spot silver last traded at $48.58 an ounce, down 6% on the week, but the firm remains optimistic about the long-term outlook. Philip Newman, Managing Director of Metals Focus, highlighted that silver has demonstrated remarkable resilience, even as it struggles to hold support at $50 an ounce.
Metals Focus forecasts that the global silver market will record its sixth consecutive annual supply deficit in 2026, though the shortfall is expected to narrow to 35 million ounces, down from 54 million ounces last year. Newman expects supply and demand to move closer to balance next year, with the possibility of a small surplus. Despite the improving supply outlook, he emphasized that silver's long-term investment appeal remains strong.
Newman noted that silver's ability to trade around $50 an ounce is encouraging, given the lack of significant institutional investment following January's historic rally and subsequent collapse. Silver prices surged to a record high of $121.65 an ounce on January 26 before falling sharply due to rising bond yields, a stronger U.S. dollar, and shifting Federal Reserve interest rate expectations. Prices are down more than 35% from their highs at the start of the year.
Industrial demand continues to provide fundamental support, even as manufacturers look for ways to reduce their exposure to elevated prices. Metals Focus expects total industrial silver demand to decline 3% this year to 640 million ounces, but consumption remains approximately 22% above 2019 levels. The biggest weakness is coming from the photovoltaic sector, where elevated prices have accelerated efforts to reduce silver consumption. However, demand outside the solar sector is expected to grow, supported by vehicle electrification, charging infrastructure, and other industrial applications.
Newman said the biggest catalyst for renewed investment interest will likely come from the broader macroeconomic environment. Investors are waiting for greater clarity on Federal Reserve monetary policy, inflation, and geopolitical tensions in the Middle East. Persistent energy-driven inflation has strengthened expectations that the Federal Reserve will raise interest rates in December, creating significant headwinds for non-yielding assets such as silver.