(Mike Maharrey, Money Metals News Service) The silver market is forecast to record a fifth straight market deficit in 2025, with demand once again outstripping supply.
Analysts at the Silver Institute call the projected market deficit “sizeable.”
The Silver Institute projects record silver offtake this year, with overall demand coming in at around 1.20 billion ounces.
Supply is expected to grow by 3 percent, but it won’t be nearly enough to feed growing demand. This will lead to a 149 million-ounce market deficit. While the gap between supply and demand will shrink by about 19 percent from last year’s level, it will remain “sizeable historically.”
This supply shortfall will have to be filled by existing stocks of above-ground metal, potentially driving prices higher.
Silver Demand in 2025
According to the Silver Institute, growing industrial and investment demand will be somewhat offset by sagging offtake in the jewelry and silverware sectors.
Industrial demand is expected to grow by another 3 percent coming off a record year in 2024. Continuing growth in the green energy sector – specifically solar energy applications – will continue to drive overall demand higher.
Policies implemented by the Trump administration will likely put pressure on renewable energy initiatives in the U.S., however, analysts at the Silver Institute still expect global photovoltaics installations to reach another all-time high in 2025.
The rapid growth of artificial intelligence (AI) will also fuel demand for silver.
Silver is a key component in circuit boards, semiconductors, and connectors and is vital in reducing electrical resistance and enhancing processing speeds in AI applications. AI also requires massive data centers that rely on advanced cooling systems and efficient electrical transmission. Silver is used in heat-dissipation materials and high-speed connectivity components in these big data centers.
Silver is also an important input in the automotive industry. Even assuming slower growth in battery electrical vehicle production, silver demand is expected to remain robust in this sector due to greater vehicle sophistication, electrification of powertrains (albeit at a reduced pace), and ongoing investment in expanding related infrastructure.
On the investment side of the coin, silver demand is expected to grow by around 3 percent due to increasing retail buying in the West. According to the Silver Institute, “As Western investors adjust to new price levels, fresh investment is expected to improve, and profit-taking will also ease.”
Analysts say there are several factors underpinning investment demand.
“Uncertainty over U.S. trade and foreign policy, record-high U.S. equities, and worries about U.S. public debt levels should all reinforce interest in portfolio diversification, which in turn will benefit silver and gold investment. Moreover, even if the pace of U.S. policy rate cuts slows in 2025, the consensus is still that they are coming. Coupled with sticky inflation, this points to potential declines in real rates ahead.”
Silver Institute analysts say that any kind of crisis could drive investment demand even higher.
Given the Federal Reserve is walking a monetary policy tightrope, and the economy has been distorted by decades of easy money policies, the likelihood of some kind of economic upheaval is elevated.
This is exacerbated by the fact that the central bank is caught in a Catch-22.
On the one hand, the Fed needs to keep rates elevated to address price inflation.
On the other hand, the debt-riddled bubble economy can’t function in a higher interest rate environment.
Clearly, the Fed can’t do both, meaning rising price inflation or an economic meltdown are in the cards. In the worst-case scenario, we could see a combination of both – stagflation.
The demand for jewelry and silverware is expected to soften in 2025, with jewelry fabrication declining by about 6 percent.
According to the Silver Institute, India will account for the bulk of the decline due to higher local prices. Chinese demand is also expected to drop due to “cautious spending by consumers on non-essential items.”
Silver Supply in 2025
On the supply side, silver mine production is expected to grow by 2 percent to a seven-year high of 844 million ounces, with increased output anticipated from both existing and new operations in several markets. But even with the surge in mine output, the silver mining sector faces structural challenges.
Silver mine output peaked in 2016 at 900 million ounces. Up until last year, silver production had dropped by an average of 1.4 percent each year. In 2023, mines produced 814 million ounces of silver.
According to Metals Focus, a combination of reserve depletion, mine closures, and a 20 percent drop in ore grades drove sagging mine output.
With prices rising, silver recycling is projected to increase by 5 percent, with volumes breaching 200 million ounces for the first time since 2012. According to the Silver Institute, “Industrial scrap will be the key growth driver, particularly changeouts in ethylene oxide catalysts. Jewelry and silverware recycling will also rise, reflecting India’s price-led gains.”
Silver Isn’t Priced for These Dynamics
While silver gained over 20 percent in 2024, many investors consider it a laggard because it remains far below its all-time high, even as gold continues to set new records. Given the supply and demand dynamics, there is the potential for silver to shine in 2025.
The gold-silver ratio is hovering at around 90-1, indicating that silver is on sale when priced in gold. Historically, when the ratio gets distorted to this degree, it tends to snap back to the mean with a vengeance as the silver price spikes to catch up.
And as already mentioned, there is the potential for economic chaos in the coming months.
Furthermore, as analyst Jesse Colombo explained, bearish investor sentiment on silver due to its perceived underperformance last year is bullish from a contrarian perspective.
When you add it all up, there are plenty of reasons to be bullish on silver and it appears at least some in the mainstream are picking up on these dynamics.
Mike Maharrey is a journalist and market analyst for MoneyMetals.com with over a decade of experience in precious metals. He holds a BS in accounting from the University of Kentucky and a BA in journalism from the University of South Florida.
