Silver's Deficit Deepens as Copper Substitution Accelerates

Silver prices rose more than 1% on Monday to around $59 per ounce as traders adjusted their positions before Wednesday's Federal Reserve interest rate decision. This move extended a recovery that began on Friday, when silver gained 1% to roughly $58 after a single-session decline of over 3%. The immediate catalyst for the rebound was the Middle East, where Washington and Tehran paused hostilities, raising hopes for a diplomatic resolution and the reopening of the Strait of Hormuz. Iran signaled it would refrain from further attacks provided the US maintains its suspension of military operations.

However, beneath this short-term price action lies a complex structural story. The silver market is heading into its sixth consecutive year of deficit, with a projected supply gap reaching 46.3 million ounces in 2026. Supply is shrinking faster than industrial demand is falling, leaving producers with little ability to ramp up supply deliberately.

The photovoltaic industry, traditionally one of silver's largest industrial consumers, is slashing its usage by 19% this year to roughly 151 million ounces due to price pressure. Manufacturers' margins have come under severe pressure as silver prices rose above $100 per ounce. LONGi plans to begin mass production of copper-based back-contact cells in the second quarter of 2026, with Jinko and Aiko pursuing similar strategies.