Metals Focus, the firm behind the World Silver Survey for the Silver Institute, anticipates a surplus of silver in 2027, yet still forecasts a higher average price for the metal next year compared to this year. The key factor driving this outlook is investor behavior, particularly the buying activity of funds that hold physical silver, rather than a supply shortage.
The surplus is primarily attributed to advancements in solar panel manufacturing, which have reduced the amount of silver required per panel. This efficiency gain outweighs the growth in solar installations, leading to a projected surplus of 37.3 million ounces in 2027. Despite this, Metals Focus expects the average silver price to rise from $72.60 this year to $84.40 in 2027, contingent on significant inflows into silver-backed funds.
On Wednesday, silver prices surged to $52.49 an ounce, up 4.58% on the day, as the dollar weakened post-US midterm elections. Gold was trading at $4,053.68, resulting in a gold-silver ratio of 77.2. This ratio indicates the number of ounces of silver one ounce of gold can buy. The interim review by Metals Focus and the Silver Institute, expected in mid-November, will provide further clarity on these forecasts.
Metals Focus remains cautious about silver's near-term performance, expecting it to lag behind gold due to higher interest rates and bond yields. However, the firm does not foresee this underperformance as permanent. The return of investor interest in silver-backed funds is seen as crucial for sustaining higher prices.