Silver Prices Surge on Investor Rush Despite Weak Demand

Silver prices have climbed sharply over the past year, rising 140.9% and recently trading around $45.30 per ounce, as investors increasingly treat the metal as a safe-haven asset alongside gold. The rally has unfolded even as parts of silver’s real-economy demand base—especially industry and jewelry—show signs of strain under higher costs.

Physical investment has been a key force behind the move. Demand for silver coins and bars rose 14%, with buying described as particularly strong across multiple regions. India recorded a 33% increase in coin and bar demand, while East Asia and the Middle East also saw sharp growth.

The Silver Institute said the rise in physical investment has contributed to a liquidity crunch, tightening the amount of metal available for other uses. Against that backdrop, overall demand fell 2% to 1.1 billion ounces, reflecting weaker consumption in industrial applications and jewelry.

Industrial demand declined 3% to 20,446 tonnes. Officials and industry participants cited high prices as a factor pushing manufacturers to look for cheaper substitutes, including in photovoltaics where silver is used in components for products such as solar panels. The shift was described as offsetting gains that might otherwise have come from infrastructure expansion, including data centers.

Jewelry demand fell 8% to 5,889 tonnes, reaching its lowest level since 2021. The decline was linked to reduced affordability and softer retail interest, including in key markets such as India and Italy. Together, the industrial and jewelry pullback highlights a widening split between investment-led buying and price-sensitive end-use consumption.

On the supply side, trends were mixed. Silver mine production increased 3% to 846.6 million ounces last year, supported by higher by-product output from copper mining in Peru and increased production in Russia. That growth was partly offset by declines elsewhere, with North American production falling to a decade-low and Asian output slipping 1%.

Looking ahead, mine production is forecast to be flat in 2026 as low-grade ores and other operational pressures persist. Forecasts for 2026 also point to continued divergence in demand: coin and bar demand is expected to rise another 18%, led by a recovery in the United States and strong interest in Germany, while industrial use is projected to fall to 19,894 tonnes and jewelry demand is expected to reach a five-year low.

The Silver Institute’s liquidity-crunch warning underscores uncertainty around market functioning if investment demand continues to absorb available supply. With industrial users already seeking alternatives and retail jewelry demand weakening, the balance between financial demand and physical consumption remains a key unknown for price stability and availability across global supply chains.