Silver Market Faces Sixth Straight Year of Deficit, Squeeze Risks Rise

Silver’s tightness is no longer just a trader’s problem. The metal that runs through solar panels, electronics, jewelry and electric vehicles is heading into a sixth straight annual deficit, and the strain is already showing up in inventories and prices.

The Silver Institute and Metals Focus projected a 46.3 million troy ounce shortfall for 2026, 15% larger than the prior year’s expected gap. That follows a 2025 market in which global demand fell 2% to 1.13 billion ounces but still outpaced supply for a fifth consecutive year. Industrial demand slipped 3% to 657.4 million ounces, while coin and bar buying rose 14%, offsetting part of the weakness elsewhere.

What makes the shortage more consequential is the stock drawdown behind it. About 762 million troy ounces have been pulled from stocks since 2021, building on 2024’s 148.9 million ounce structural deficit and a combined 2021-2024 shortfall of 678 million ounces. In October 2025, the market suffered what the Silver Institute called an “unprecedented liquidity squeeze,” driven by falling inventories, metal shifting into CME vaults, rising exchange-traded product holdings and surging bar and coin demand. Silver prices broke $100 for the first time in January 2026, while the gold-silver ratio fell below 50 for the first time since 2012.

The question now is whether weaker end-use demand will finally ease the pressure. Industrial fabrication is forecast to decline 2% in 2026 to about 650 million ounces, with solar demand hit by thrifting and substitution away from silver. Yet the market is still being supported by AI infrastructure, automotive use and power-grid investment, and that leaves physical supply vulnerable if investors pile in again. With London supplies tight and above-ground inventories thinner after five years of deficits, silver looks less like a temporary squeeze than a system still struggling to catch up with consumption.