Moneycontrol Pro Panorama | Will silver continue to sparkle in 2026?

There are structural factors that influence silver prices, which are different from that of gold.

Dear Reader,

Silver, the precious white metal, vaulted on Thursday to cross the Rs 2 lakh per kilogram (kg) mark, leaving investors awestruck. In the past one year, it returned 133 percent, twice that of its counterpart and safe-haven asset -- gold. Indeed, the bygone year 2025 has been a rewarding one for investors in precious metals compared to even equities as Nifty 50 barely yielded 6 percent.

The obvious questions are: What’s driving the sparkle in silver? How long will it continue?

Primarily, the reasons supporting the surge in silver prices are similar to gold. Precious metal prices are often known to rise during periods of geopolitical tensions, war, economic downturn or uncertainty. This time around, the rally is fuelled by the US Federal Reserve's interest rate cuts, conflicts in Russia-Ukraine and the Israel-Palestine regions and fears of an AI bubble busting the euphoria in equities. All are driving cash flows towards these safe haven assets.

But there are structural factors that influence silver prices, which are different from that of gold. According to a note by multinational ING Bank, silver’s strength in 2025 is underpinned by a combination of factors including a persistent supply deficit following strong industrial demand. “Industrial demand accounts for more than half of total silver consumption,” it explains.

Also, even if demand from China’s solar power sector, which is a significant user of silver slows, the white metal finds use in electrification, power grid upgrades, and automotive components, especially in hybrid and battery electric vehicles and electronics, which offer demand tailwinds.

Meanwhile, the supply side is unlikely to lead to moderation in skyrocketing prices. An example in point is the drop in London’s vaults, a primary global storage hub, between June 2022 and March 2025. The bigger issue is silver output cannot be scaled up quickly. Analysts say almost three-fourths of the supply comes as a by-product of mines that produce lead, zinc, copper or gold. Besides, mined silver production is reportedly down 3 percent this year and is also the fifth year of deficit globally.

If the above reasons don’t suffice, the ING note highlights that the gold/silver ratio is down at 70 – a year-to-date low – from a peak of 105 around Liberation Day, suggesting increasing institutional investor confidence in silver.

Looking ahead into 2026, investors have enough reasons to remain optimistic on silver prices. But should one allocate more in this basket? The white metal trades at $66/ounce in international markets and given the meteoric rise, it could face selling pressures in the near term.

It may be prudent to take note of the fact that silver has fallen harder when the outlook changes. And, a change in outlook could be triggered by fears of industrial slowdown that will in turn, impact demand, although the price is unlikely to tumble into the abyss. It is often called the “devil’s metal” due to price volatility.

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