Is Silver Becoming the New Gold?

Key Takeaways

• Silver is forecast to run a supply deficit for the sixth year in a row.
• Investor demand for silver coins and bars is forecast to rise 18% in 2026.
• New silver supply is slow to arrive because most silver is mined alongside other metals.

As gold continues to become more valuable with each bull run, silver has seemingly been shifting its job title from blue collar worker to Wall St investor. Ever-increasing liquidity means investors are cluing in on asset ownership being the gamechanger. This could be a major reason why investor demand is starting to eat away market share from industrial demand, and this is a recipe that has historically been seen before asset prices rise sharply.

Think about housing prices. Your parents needing a house to live in surely affected the price in a positive way. This is similar to industrial demand for silver. Now let’s talk investors acquiring as much real estate as possible in the last 20 years. Which has caused a more aggressive price increase?

Silver’s supply deficit is still there

Silver has fallen harder than gold in the recent pullback. Some commentary has blamed solar manufacturers for using less silver. But the wider market still looks supportive. Silver is expected to record another supply deficit this year while demand for bars and coins is forecast to rise. The major deficit still exists.

The Silver Institute’s April outlook forecast a 46.3 million ounce deficit in 2026. That would be the sixth consecutive year in which demand exceeds supply. The forecast already includes lower solar consumption and a 3% decline in industrial demand. Even after those reductions, existing silver inventories are expected to be needed to cover the shortfall.

Coin and bar demand is forecast to rise

Coin and net bar demand is forecast to rise 18% this year. This is potentially the most important fuse in the silver market. Silver can attract buyers looking to protect against currency depreciation and rising government debt. That gives it a source of demand that can strengthen even when some industrial uses slow. A recovery in physical buying would put more pressure on a market already drawing on existing stocks.

Why silver supply is slow to respond

Supply cannot respond quickly to stronger buying. Much of the world’s silver is mined alongside lead, zinc, copper and gold. Output therefore depends partly on activity in those markets. Higher silver prices can encourage new investment, but bringing more metal into production takes time.

What could this mean for the silver price?

What might happen to the price of silver as the existing deficit for industry meets the speculative demand of global investors? The last year may have been the first quake in what is to come. For a metal that in recent years has at times had a smaller market cap than Bitcoin, the days may be numbered for its low valuation.

This article is general information only and does not constitute financial advice. Past performance is not indicative of future results. Always conduct your own research or consult a licensed financial adviser before making investment decisions.