Silver Price Forecast: Diverging Paper and Physical Markets at Odds

The recent outflow of $29 million from the largest silver ETF in five trading days through September 8 is a divergence from major gold ETFs, which attracted almost $2 billion. This matters because silver is more sensitive to investment positioning and industrial expectations than gold.

The Silver Institute expects mine supply to remain broadly constrained in 2026, with industrial demand being reshaped by high prices, particularly through lower silver usage in photovoltaics. A multi-year physical deficit has not disappeared despite the recent outflows.

A large share of silver is produced as a by-product of lead, zinc, copper, and gold mining, meaning that higher silver prices do not automatically persuade miners to open new silver mines. Production decisions are driven largely by the economics of primary metals, which can take years to respond to changes in silver prices.

The Federal Reserve's (Fed) control over interest rates affects paper silver prices but does not directly impact the physical market. The physical market operates on a different clock, with warning signs appearing through declining inventories, tighter availability, premiums, and stronger competition for deliverable metal.