Silver’s rally looks spectacular on the surface. Prices have , massively outperforming gold and most other asset classes.
But beneath the charts and bullish forecasts lies a far more unsettling reality.
This is not a normal bull market. Silver’s rise is increasingly being driven not by sentiment or speculation, but by a deep and persistent shortage of physical metal. And that shortage is now reshaping how the market works.
Market analysts say 2025 marked a structural break for silver. After years of underinvestment in mining, declining ore grades and rising industrial consumption, global silver demand has now exceeded supply for the fifth consecutive year.
Unlike past cycles, supply has failed to respond meaningfully even as prices surged.
Silver’s dual role has intensified the strain. It is both a precious metal and a critical industrial input.
has risen sharply, with consumption from photovoltaic and EV segments estimated to have doubled in 2025 compared to earlier years.
The result is a market where rising prices are not solving the problem. They are exposing it.
One of the clearest signs of stress is visible inventories.
Physical silver stocks across major global hubs have been steadily drawn down.
China, one of the world’s largest refiners and consumers of silver, has seen inventories in its vaults fall to decade-low levels. These outflows have been driven by industrial demand, investment accumulation and possible hoarding.
At the same time, policy shifts are adding pressure. Proposed export licensing requirements from China, expected to kick in from 2026, signal tighter control over outbound flows of silver. That matters because global markets rely on free movement of metal to balance shortages across regions.
With less metal leaving China and inventories elsewhere already thin, the global pool of available silver is shrinking.
Silver has long been dominated by paper trading on futures exchanges, where contracts often represent many times the amount of physical metal available for delivery.
In 2025, that imbalance became impossible to ignore.
A large share of registered silver inventories on major exchanges was claimed for delivery within a very short period, revealing just how little deliverable metal remained relative to outstanding futures positions. Open interest continues to dwarf physical availability.
This matters because prices are no longer being set purely by trading flows. They are increasingly being dictated by who can actually source real metal.
Persistent premiums in Asian physical markets over Western futures prices are not a glitch. They are a signal that arbitrage is breaking down because there is not enough metal to move.
Another layer of risk is concentration.
A significant portion of exchange-held silver is controlled by a small number of large financial institutions or locked up in exchange-traded products. Much of this metal is effectively unavailable to meet sudden delivery demand.
That concentration creates fragility. In such a market, prices can move sharply with very little warning, both higher and lower.
Silver’s rally looks powerful, but it is also brittle.
Silver is not alone.
2025 turned out to be a “perfect storm” year for metals. Gold surged 75–80%, supported by record central bank buying, de-dollarisation trends and geopolitical stress.
, driven by demand from AI data centres, electrification and pre-emptive stockpiling amid tariff fears.
Silver stood out because it combined both worlds. It benefited from safe-haven flows like gold, while also riding the industrial demand wave powering copper.
But unlike copper, silver’s supply response has been far weaker.
Analysts believe the structural forces supporting silver are unlikely to disappear quickly. The shift towards green energy and AI makes silver indispensable at scale, with no cheap substitutes available.
On the supply side, there are no major capacity additions in sight, raising the risk that 2026 could become a sixth consecutive year of physical deficit.
That said, the very forces driving silver higher also make it risky.
A market driven by scarcity rather than balance can stay elevated for longer than expected, but it can also see violent corrections. If inflation remains sticky and central banks are forced to reverse course on rate cuts, metals could face sharp pullbacks.
This is why experts caution against chasing prices blindly.
Silver’s spectacular rally is not just about returns. It is a warning.
It shows what happens when years of underinvestment collide with rising industrial dependence. It exposes the growing gap between paper markets and physical reality.
And it highlights how stretched global commodity systems have become as the world races toward electrification and technological expansion.