The silver market witnessed a historic milestone on Friday as prices surged to an unprecedented peak. The precious metal achieved a new all-time high of $64.64 per ounce, driven by a powerful combination of relentless industrial demand and a sustained supply shortfall. The record-setting sprint was followed by a period of consolidation as investors locked in profits.
Unprecedented Annual Gains
Silver’s performance this year has been nothing short of spectacular. With a gain exceeding 100% year-to-date, the metal is on track for its strongest annual performance since 1979. That year was marked by the infamous Hunt brothers’ attempt to corner the market. Despite a pullback of approximately 3% on Friday that brought prices to around $62, silver still registered a weekly advance of nearly 5%.
A Deepening Structural Imbalance
The market is grappling with its fifth consecutive annual supply deficit. Since 2021, the cumulative shortfall has reached roughly 800 million ounces. Analysts project another deficit for 2025, estimated to be between 95 and 149 million ounces.
Global mine production remains stagnant at about 813 million ounces per year, while total demand surpasses 1.2 billion ounces. This imbalance has drained inventories at major trading hubs to historic lows. Stockpiles at the COMEX have plummeted 70% from their 2020 peaks, while the London Metal Exchange is experiencing record tightness.
A critical complicating factor is that 75% to 80% of global silver output is a byproduct of mining for copper, zinc, and lead. Consequently, higher silver prices alone cannot stimulate more production unless the economics of these base metals also improve.
Industrial Demand Reaches New Heights
Industrial consumption, now exceeding 700 million ounces annually, is a primary engine of growth. Key drivers include the solar power sector, electric vehicle manufacturing, and the booming artificial intelligence infrastructure that requires vast data centers. The traditional electronics industry remains the single largest industrial consumer.
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The U.S. government’s recent classification of silver as a critical mineral underscores its strategic importance for domestic industry and may spur additional demand.
Monetary Policy Adds Fuel
The U.S. Federal Reserve contributed to the bullish sentiment this week by implementing its third 25-basis-point interest rate cut of the year. Chairman Jerome Powell signaled a less restrictive policy stance for 2026. Lower interest rates enhance the appeal of non-yielding assets like precious metals. A concurrently weaker U.S. dollar further boosted demand for dollar-denominated silver.
Investment demand has also been robust. Holdings in silver-backed exchange-traded funds (ETFs) have risen by approximately 18% since the start of the year. Physical demand from retail investors remains strong, with popular bullion coins trading at double-digit premiums over the spot price.
Market Stress and Price Outlook
The intense physical market strain is evident in London, where borrowing costs for silver have skyrocketed to annualized rates as high as 200%, indicating severe delivery stress.
Several investment banks have revised their forecasts upward. Bank of America anticipates silver reaching $65 per ounce by 2026. Some market analysts suggest that persistent deficits could even pave the way for prices between $75 and $100.
As long as the structural supply deficit continues and industrial demand maintains its upward trajectory, the prevailing bullish trend for silver is likely to remain intact.
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