Why Silver Is Gaining Momentum in 2026 | NXG Markets

In January 2026, silver surpassed $100 per ounce for the first time. Beyond its importance, this milestone highlights underlying developments. The underlying factors behind this rise have been building for five years and remain in place.

On February 10, 2026, the Silver Institute, using research from Metals Focus, reported that the global silver market will probably face a deficit for the sixth year in a row. The expected shortfall is 67 million ounces. This is not a temporary issue, but an ongoing gap between supply and demand.

Silver’s momentum in 2026 comes from three main factors: an ongoing supply deficit, strong industrial demand driven by the energy transition, and a macroeconomic climate where lower real yields make holding silver more attractive. These factors work together, creating the strongest case for silver since the early 2010s.

This article breaks down each driver with precision. No price targets presented as certainties. No promotional framing. Just the mechanics of a market that is under pressure from multiple directions at once.

A supply deficit happens when demand for a commodity is higher than the available supply from mining, recycling, and other sources. For silver, this imbalance has continued since 2021.

Six Consecutive Years of Structural Imbalance

From 2013 to 2020, the silver market usually had more supply than demand. This changed in 2021. Since then, demand has been higher than supply each year. According to Peel Hunt’s January 2026 report, 2025 marked the fifth year in a row with a deficit. Mine output rose about 2% to 830 million ounces, but this was still far below the 1.2 billion ounces used by the market.

The Silver Institute’s February 2026 outlook estimates total silver supply for the year at 1.05 billion ounces. This includes about 820 million ounces from mining and over 200 million ounces from recycling, the highest recycling level since 2012. Even with this slight increase, the market still faces a 67 million ounce deficit.

Silver Market Supply-Demand Balance: 2021-2026 (Forecast)

Source: Silver Institute / Metals Focus. F = Forecast. Figures rounded to the nearest whole number. Not investment advice.

Why Supply Cannot Respond Quickly

Silver supply is not very flexible. More than 70% of the world’s silver comes as a by-product from mining other metals like copper, lead, zinc, and gold. As a result, silver prices have little effect on how much silver is produced. Companies mining copper or zinc do not boost production just because silver prices go up—they focus on their main metal.

Mines that focus mainly on silver make up only 28% of total silver supply, and this share has been slowly shrinking. Even with today’s high prices, it takes five to ten years for new silver mines to go from discovery to production.

Recycling helps a bit. The Silver Institute expects recycling to top 200 million ounces in 2026, the highest since 2012, as higher prices encourage more scrap. Still, even with this increase, the market will be short by 67 million ounces.

The main point is that the silver supply deficit is a long-term issue, not just a short-term cycle. Higher prices for one year are not enough to fix it, since most silver production depends on the economics of other metals.

Industrial use now leads the silver market. The Silver Institute reports that in 2025, industrial uses made up more than half of all silver demand for the second year in a row. This share has grown by 50% since 2015, showing a major change in what drives silver demand.

Industrial demand for silver is less flexible than demand for jewellery. Manufacturers usually cannot replace silver in most of its uses. When prices go up, they may try to use less or find substitutes, but good alternatives are limited in important applications.

Photovoltaics: The Largest Single Growth Driver

Solar panel manufacturing relies on silver paste as a conductor in photovoltaic cells. Global solar PV capacity is forecast to reach 665 gigawatts of new installations in 2026, according to industry projections cited by Equiti. At roughly 120-125 million ounces consumed annually in this sector alone, photovoltaics now represent a significant and growing share of total silver offtake.

The industry has worked for years to use less silver in each solar panel, and some progress has been made. However, the number of panels installed worldwide is growing even faster than these savings. As a result, total silver demand from solar keeps increasing.

Electric Vehicles and Electronics

Electric vehicles contain significantly more silver than internal-combustion-engine vehicles. Silver is used in EV battery management systems, electrical contacts, and power electronics. The Silver Institute projects EV-related silver demand will grow at an average annual rate of 3.4% through 2031, by which point EVs are expected to account for 59% of the automotive market.

In electronics more broadly, silver consumption in printed circuit boards, semiconductors, and communication equipment runs at 240 to 260 million ounces annually. The expansion of artificial intelligence infrastructure is adding incremental demand. Goldman Sachs projects that global data centre power consumption will grow by 165% by 2030. If silver-intensive infrastructure supports that expansion, the demand pull could add a further 67.5 million ounces to annual consumption, according to estimates cited by TradingKey.

Silver Industrial Demand by Major Sector: 2024 Actuals and 2026 Trends

Source: Silver Institute / Metals Focus. XS.com. Figures are approximate. Not investment advice.

The Silver Institute points out that while some parts of industrial demand are a bit weaker because of high prices, the long-term growth potential from new technologies is still strong.

Silver plays two roles: it is used in industry and also acts as a monetary metal. Because of this, it reacts to both industrial and financial trends. When both factors are positive, silver’s price tends to rise even more.

Real Yields and the Opportunity Cost Calculation

The cost of holding silver depends on real yields, which are interest rates after inflation. When real yields are high, investors miss out on better returns from cash or bonds. When real yields drop, this missed return is smaller, so silver becomes more appealing.

The Federal Reserve cut rates by 25 basis points on three separate occasions in 2025, according to reporting cited by Scottsdale Bullion and Coin. Markets are currently pricing in the possibility of additional cuts through 2026 if economic data softens. A lower-rate environment reduces the opportunity cost of holding silver and tends to weaken the U.S. dollar, thereby making silver less expensive for non-dollar buyers globally.

The Dollar and Global Silver Demand

Silver prices are denominated in US dollars in global markets. A weaker dollar increases the affordability of silver for buyers transacting in other currencies. This dynamic is relevant to the largest physical silver-consuming regions, including China and India. China implemented new licensing restrictions on silver exports effective January 1, 2026, according to Peel Hunt, limiting eligibility to producers that meet minimum output and credit thresholds. This constrained physical availability in international markets.

The macro backdrop adds further complexity. Elevated fiscal deficits in major economies, concerns about Federal Reserve independence noted by the Silver Institute, and ongoing geopolitical instability all contribute to demand for monetary hedges. Silver, trading at a fraction of gold's price, has historically attracted retail and institutional capital when investors seek accessible inflation hedges.

Fiscal Deficits and Long-Term Inflation Pressure

Structural fiscal deficits create long-dated inflationary pressure. Governments running persistent deficits must either borrow more, raise taxes, or monetise debt. Each path has implications for the purchasing power of currency over time. Precious metals benefit from long-term expectations of currency debasement, and silver benefits specifically from the combination of this monetary demand and its irreplaceable industrial applications.

In 2026, the financial and industrial reasons to own silver support each other. Lower real yields make holding silver less costly and also help the industries that use silver.

The gold-silver ratio measures the number of ounces of silver required to purchase one ounce of gold. It is one of the most widely tracked relative value indicators in the precious metals market.

The long-term historical average of the ratio ranges from 50 to 67. From 2013 to 2022, it frequently exceeded 80 and peaked above 100 in early 2020, during the pandemic-driven market dislocation. That extreme reading reflected the historical cheapness of silver relative to gold.

As silver is gaining momentum in 2026, the ratio has compressed sharply. The Silver Institute confirmed that the gold-silver ratio fell below 50 in January 2026, a level last seen in 2012, following silver's breach of $100. It has since rebounded as silver pulled back from its peak, with current readings in the 55-65 range, according to Equiti's January 2026 analysis.

Gold-Silver Ratio: Historical Reference Points

Source: Silver Institute, Equiti, Sprott. Ratios approximate. Not investment advice.

When the gold-silver ratio drops, it means silver is doing better than gold. This usually happens when industrial demand is strong, investors are optimistic, or silver’s price gap with gold narrows. The ratio is helpful for context, but it should not be used alone to predict prices.

In a precious metals bull market, CME Group's 2026 outlook suggests that gold typically leads, with silver then amplifying gains as momentum builds. This occurs because the silver market is smaller and more volatile than the gold market.

Physical investment demand for silver is forecast to rise 20 % in 2026 to 227 million ounces, reaching a three-year high, according to the Silver Institute. This marks a reversal after three consecutive years of declining Western physical investment.

ETF inflows tell a similar story. Peel Hunt estimated net inflows to silver-backed exchange-traded funds reached approximately 150 million ounces in 2025, with total holdings reaching 864 million ounces by the end of December. While holdings edged lower to 847 million ounces by mid-January 2026, the structural level of ETF accumulation remains meaningfully higher than the period of outflows that characterised 2022 to 2023.

The rebound in Western physical investment is due to two main reasons. First, silver's strong price gains in 2025—the best since 1979, according to the Silver Institute—brought back investor interest after years of little movement. Second, economic uncertainty and concerns about government finances and currency stability have increased demand for real assets such as silver.

COMEX Inventory and Physical Availability

Physical availability of deliverable silver in Western markets has tightened significantly. Peel Hunt notes that COMEX registered inventories, the metal available for futures contract delivery, have fallen more than 70 % since 2020. Citigroup cited this acute shortage as a key driver of its January 2026 forecast revision, projecting silver to reach $100 per ounce by March, with a target of $110 in the second half of the year.

When silver lease rates rise above normal levels, it indicates a real shortage of available metal. CBS News reported in January 2026 that these high lease rates provide solid support for prices, making it difficult to argue that the rally is merely speculative.

Institutional forecasts for silver in 2026 are more widely dispersed than usual. The speed and magnitude of the 2025 move have made traditional valuation anchors less useful for short-term projections. However, the consensus among major institutions remains bullish, grounded in fundamental deficits and the monetary backdrop.

2026 Silver Price Forecasts: Selected Institutional Views / Source

Source: Scottsdale Bullion & Coin (aggregated forecasts), Silver Institute, Peel Hunt. Forecasts are not guarantees. Not investment advice.

The difference between Bank of America’s estimate of about $60 per ounce and Citigroup’s higher short-term target shows real disagreement in the market. Bank of America thinks prices will go above what fundamentals suggest, while Citigroup focuses more on the premium caused by physical shortages. Both views are valid ways to look at the same data.

UBS offers a key warning: the silver market is smaller and less liquid than gold’s, which makes price swings bigger in both directions. The same factors that push silver up quickly can also cause sharp drops if investor sentiment changes.

A thorough look at silver’s momentum in 2026 means considering what could slow it down or reverse it. While the case for higher prices is strong, there are still valid counterarguments.

Dollar Strength and Rate Policy Reversal

If economic data in the United States remains stronger than consensus expectations, the Federal Reserve may hold rates higher for longer or reverse course on cuts. A stronger dollar and higher real yields would reduce silver's relative attractiveness compared to income-generating assets. CBS News identified this as the primary downside scenario for silver in 2026.

Industrial Demand Softness

Silver's industrial demand anchor is robust but not immune to economic cycles. A meaningful slowdown in Chinese manufacturing, a deceleration in solar installation activity, or a contraction in global electronics output would reduce industrial silver offtake. The Silver Institute notes that some industrial sub-segments are already showing softness due to high prices, particularly in sectors where demand is more price-elastic.

Supply Response Over Time

Rising silver prices are making mining more profitable. The Silver Institute says that costs for primary silver miners dropped to their lowest since 2022 in early 2025. Better profits allow for more investment in new projects. If investment picks up over the next three to five years, supply could eventually catch up with demand. However, this is more of a medium-term issue, not an immediate concern for 2026.

Volatility as a Structural Feature

UBS and Bank of America both stress that silver’s small and less active market makes it prone to big price swings. A quick change in investor positions, a fund rebalancing, or a policy surprise could cause large drops, even if the overall outlook is positive. Investors should keep this volatility in mind when deciding how much to invest.

Silver 2026: Key Risks vs. Supporting Factors

For informational purposes only. Not investment advice. Sources: Silver Institute, Bank of America, UBS, CBS News, CME Group.

Silver's momentum in 2026 is based on real supply and demand data, not just investor mood. Here are the main structural points for market participants:

For traders and investors analysing silver through NXG Markets, the data support a constructive structural view. The size and timing of position entry and exit require individual assessment of risk tolerance, time horizon, and portfolio construction.

Q: Why is silver gaining momentum in 2026?

A: Silver is gaining momentum in 2026 due to three converging forces: a sixth consecutive year of structural supply deficit projected at 67 million ounces, sustained industrial demand from solar energy, electric vehicles, and AI infrastructure, and a monetary environment of falling real yields that reduces the opportunity cost of holding non-yielding assets like silver.

Q: What is the silver supply deficit?

A: The silver supply deficit is the gap between total global silver demand and total available supply from mining and recycling. The deficit began in 2021 and has persisted through 2025. In 2026, the Silver Institute, using research from Metals Focus, projects the deficit at 67 million ounces.

Q: What is the gold-silver ratio, and what does it tell investors?

A: The gold-silver ratio measures how many ounces of silver are required to buy one ounce of gold. A higher ratio indicates that silver is cheaper relative to gold. The ratio peaked above 100 in 2020 and fell below 50 for the first time since 2012 in January 2026, reflecting silver's outperformance during the current bull cycle.

Q: How does industrial demand affect the silver price?

A: Industrial applications now account for over 50 % of total silver consumption. This creates a demand floor that is less sensitive to investor sentiment than jewellery or investment demand. When industrial consumption grows faster than mine supply can increase, the structural deficit widens, and prices face sustained upward pressure.

Q: What are the main risks to silver's momentum in 2026?

A: The primary risks are a reversal in monetary policy that strengthens the US dollar and raises real yields, an economic slowdown that reduces industrial silver consumption, and a mean reversion in speculative positioning given silver's small, volatile market. Bank of America has flagged that current prices may exceed its estimated fundamental value of around $60 per ounce.

Q: Why can't silver mine supply increase quickly in response to higher prices?

A: Over 70% of silver is produced as a by-product of copper, lead, zinc, and gold mining. Producers of those metals respond to the economics of their primary metal, not silver prices. Primary silver mines, which do respond to silver prices, account for only 28% of supply. New mines also take five to ten years to bring into production.

Q: What is the Silver Institute's forecast for the silver market in 2026?

A: The Silver Institute, publishing its February 10, 202,6 annual outlook with research from Metals Focus, forecast a sixth consecutive year of market deficit at 67 million ounces. The total supply is projected at 1.05 billion ounces. Physical investment demand is forecast to rise 20% to 227 million ounces, its highest in three years.

Disclaimer

This article is produced for informational and educational purposes only. It does not constitute financial, investment, or trading advice. Past performance of any asset is not indicative of future results. Trading commodities, CFDs, and other financial instruments carries a high level of risk. You should seek independent financial advice before making any trading or investment decisions. NXG Markets does not guarantee the accuracy of third-party data or forecasts cited herein.