By Sonny Rollins
Silver has lost nearly half its value from January’s record, but the market’s structural deficit has not disappeared.
At about US$63.81 an ounce, silver is down approximately 47.5% from its US$121.62 record on Jan. 29. The correction has been driven by a combination of higher real yields, weaker speculative positioning and concern that manufacturers are using less silver in solar applications.
Yet supply remains constrained. The market is heading toward a sixth consecutive annual deficit, estimated at approximately 46.3 million ounces (Moz) for 2026, after a 40.3 Moz shortfall in 2025.
That leaves investors and mining companies facing a market with two opposing forces: a supportive physical balance and a restrictive macroeconomic backdrop.
Silver’s correction has reset the market
The scale of the decline has changed the character of the silver market.
Silver’s January rally pushed prices to levels that encouraged aggressive speculative participation and heightened concerns about a blow-off move. The subsequent decline removed much of that excess. At $63.81, the metal remains elevated compared with its pre-rally levels, but the market is no longer trading at the same degree of speculative intensity.
The key macro pressure is the 10-year US real yield, at approximately 2.41%. Real yields measure the return on government debt after inflation expectations and are closely watched by precious-metals investors.
When real yields rise, non-yielding assets such as silver become less competitive with inflation-adjusted bonds. The effect is not automatic: silver also responds to industrial demand, physical availability and risk sentiment: but a real yield above 2% creates a significant hurdle for a sustained move higher.
J.P. Morgan has already reduced its 2026 average silver forecast to about $70 an ounce, from an earlier estimate near $84. Its current quarterly framework places silver at around $68 in the third quarter and $74 in the fourth quarter. The bank’s analysis points to softer photovoltaic demand, a partial unwinding of physical tightness and the possibility that the gold-to-silver ratio returns toward more traditional levels.
Positioning is washed out, but not yet bullish
Futures positioning suggests the market has moved away from the crowded-long conditions seen earlier in the year.
Non-commercial traders are net long by approximately 20.5% of open interest, placing current positioning around the 20th percentile of its recent range. In practical terms, speculative length is relatively light compared with the previous 60 weekly observations.
At the same time, gross speculative shorts have increased by approximately 40% since mid-July.
This combination matters for the path of prices:
- There is less heavily leveraged long exposure available to liquidate if prices fall.
- A larger short base could provide buying pressure if silver moves higher unexpectedly.
- The market is more vulnerable to sharp two-way moves because positioning is less one-sided.
- A decline in real yields or a renewed gold rally could trigger short covering even without a major change in physical demand.
The positioning data do not establish a bullish trend by themselves. They show that the market has become less crowded and potentially more sensitive to fresh catalysts.
Silver refining and bullion processing connect mine supply with physical-market demand.
The deficit is smaller than previous estimates: but still persistent
The latest market balance points to a 46.3 Moz deficit in 2026, following the 40.3 Moz deficit recorded for 2025.
A deficit occurs when mine production and recycling are insufficient to meet total demand. The gap must then be covered by above-ground inventories, exchange stocks, commercial holdings or other forms of accumulated supply.
The cumulative drawdown since 2021 is estimated at 762.1 Moz. That figure is important because annual deficits do not exist in isolation. Each year of undersupply reduces the buffer available to absorb a demand shock or a temporary disruption to mining and refining.
| Silver market indicator | Approximate level | Why it matters |
|---|---|---|
| Current silver price | $63.81/oz | Nearly 47.5% below the January record |
| 2025 market deficit | 40.3 Moz | Fifth consecutive annual shortfall |
| 2026 expected deficit | 46.3 Moz | Sixth consecutive annual shortfall |
| Cumulative stock drawdown since 2021 | 762.1 Moz | Shows the depth of the multi-year imbalance |
| 10-year real yield | 2.41% | Raises the opportunity cost of holding silver |
| Net speculative positioning | 20.5% of OI | Around the 20th percentile of recent history |
| Gold-silver ratio | About 68:1 | Indicates silver has underperformed gold since January |
The expected deficit is not large enough to guarantee an immediate price rally. It does, however, limit the case for a prolonged collapse unless demand weakens materially or recycling responds more strongly than expected.
Mine supply is also relatively slow to adjust. Silver is frequently produced as a by-product of lead, zinc, copper and gold mining. Higher silver prices therefore do not always lead directly to a rapid increase in silver output. A primary silver project may respond to price signals, but a large share of global production is determined by the economics of other metals.
Solar thrifting is reducing demand, not eliminating the deficit
The photovoltaic sector remains the most important swing factor on the demand side.
Manufacturers have been reducing the amount of silver used in solar cells through thrifting, which means using less metal per unit of output. Substitution with copper and other conductive materials is also progressing, although adoption rates vary by technology and manufacturer.
The latest estimates indicate that photovoltaic silver demand could fall by approximately 19%, to around 151 Moz. J.P. Morgan has described a more severe downside possibility of up to 30%, or a reduction of roughly 60 Moz in annual solar demand.
That trend is significant, but it has not closed the broader market gap. Industrial applications beyond solar: including electronics, power infrastructure, automotive systems and grid equipment: continue to consume substantial volumes.
The main question is not whether solar demand is weakening in absolute terms. It is whether the pace of new solar installations can outstrip the reduction in silver intensity per panel.
If installations grow quickly enough, total silver demand may remain high even as manufacturers thrift. If panel growth slows at the same time as thrifting accelerates, the demand loss could become large enough to push the market toward balance.
Solar-cell manufacturing is reducing silver intensity through thrifting and substitution.
India’s premium shows that physical markets remain uneven
India is adding another layer of complexity.
New import licensing requirements have disrupted the flow of high-purity silver into the country, while duties and approval delays have raised the cost of obtaining metal. The result has been an import-related premium of approximately $4 an ounce, with temporary spikes reported in the $5 to $6.50 range.
The premium does not translate directly into an equivalent increase in the global benchmark price. It is primarily a signal of regional tightness and restricted availability. Licensed importers may be able to source material, while smaller traders and fabricators face longer lead times or higher costs.
For the global market, India’s policy creates three potential effects:
- Regional price fragmentation: Domestic prices can move further above international benchmarks when licences are delayed.
- Trade-flow changes: Available units may be redirected toward approved importers and channels.
- Demand timing risk: Some consumption may be delayed rather than permanently destroyed.
If licensing bottlenecks persist through the year, India could continue to provide support to the physical market even while global investors remain cautious.
The gold-silver ratio offers a useful valuation framework
The gold-silver ratio is currently around 68:1, meaning it takes roughly 68 ounces of silver to purchase one ounce of gold.
That is close to the upper end of the range associated with a more normal precious-metals market, but it remains well above the unusually low levels recorded during silver’s January surge.
The ratio helps separate monetary conditions from industrial fundamentals. If gold remains firm while silver lags, the ratio rises. If silver begins to outperform because of tightening physical supply or short covering, the ratio falls.
A simple framework illustrates the sensitivity:
- Gold at $4,500 and a ratio of 68 implies silver near $66 an ounce.
- Gold at $4,500 and a ratio of 55 implies silver near $82 an ounce.
- Gold at $5,000 and a ratio of 55 implies silver near $91 an ounce.
This is not a forecast model. It shows why silver needs either stronger gold, a lower ratio, or both to move decisively beyond the $70–$80 range.
Silver price prediction 2026: bear, base and bull cases
The following scenarios combine the current yield environment, positioning data, market deficit and industrial-demand risks.
| Scenario | Indicative 2026 range | Conditions |
|---|---|---|
| Bear case | $55–$65/oz | Real yields remain above 2.4%, the dollar strengthens, solar thrifting accelerates and industrial demand softens |
| Base case | $68–$78/oz | The deficit persists, India’s physical premium remains elevated, but higher yields limit investment flows |
| Bull case | $90–$120/oz | Real yields decline sharply, gold strengthens, short covering accelerates and physical tightness overwhelms solar-demand losses |
The base case is closest to the current institutional outlook. It allows for a persistent deficit without assuming that the deficit alone can overpower monetary conditions.
The bear case would not require a market surplus. Silver could trade below $65 even with a deficit if investors reduce exposure, the dollar appreciates and industrial demand slows faster than supply.
The bull case requires a more substantial change. Lower real yields would likely be the cleanest catalyst, but a supply disruption, renewed safe-haven demand or an abrupt increase in physical premiums could also accelerate the move.
Mine supply remains difficult to expand quickly because much silver is produced as a by-product.
What mining companies should monitor
For silver producers and developers, the price outlook is only one part of the operating equation.
Higher realized prices can improve margins and project economics, but companies remain exposed to energy costs, labour shortages, treatment charges, sustaining capital and permitting delays. By-product producers may also see their silver revenue increase without being able to expand silver output independently.
The most important indicators for the rest of 2026 are:
- The direction of the 10-year real yield and US dollar.
- Changes in CFTC positioning and the pace of short covering.
- Photovoltaic silver intensity and copper-substitution rates.
- Indian import licences, domestic premiums and shipment volumes.
- Mine supply, recycling and exchange inventories.
- Whether the gold-silver ratio remains near 68 or begins to fall.
The market’s central tension is clear. Silver has already experienced a major valuation reset, and speculative longs have been reduced. But with real yields still high and solar manufacturers cutting silver use, the next leg higher will require evidence that physical tightness is becoming more influential than macroeconomic restraint.
For now, the most defensible silver price prediction for 2026 is a volatile market centred around the high-$60s to mid-$70s, with a persistent deficit providing a floor and elevated real yields limiting the upside. A return to the January record would require a much more favourable combination of falling yields, stronger gold and renewed physical or investment demand.
This article is for market analysis and general information only. It does not constitute financial advice or a recommendation to buy or sell any security.
Related Skillings coverage: Gold and silver price outlook 2026, Copper price forecast 2026, and Critical minerals supply chain 2026.