The Bull Case for Silver

COMMODITY RESEARCH · PRECIOUS METALS

The Bull Case for Silver

Structural deficit, inelastic supply, and a hybrid industrial-monetary bid — a counterpoint to the demand-destruction narrative

05 September 2026

Spot reference: silver ~$66/oz, gold ~$4,420/oz (GSR ~67) — down from the 29 Jan 2026 intraday peak near $122

Prepared for institutional clients

6th

Consecutive annual deficit year

~46 Moz

2026F shortfall — Silver Institute / Metals Focus

~67

Gold-silver ratio, vs. sub-50 prior bull-cycle lows

~70%

Of mine supply is a byproduct of other metals

Executive Summary

Recent sell-side commentary — including J.P. Morgan's move to trim its 2026 silver forecast toward the mid-$60s on solar substitution — has reframed the narrative around demand destruction. That risk is real and should not be dismissed. But it is one input into a multi-factor thesis, and on balance we believe the structural and monetary case for silver remains intact even after the correction from January's spike. The market is running its sixth consecutive annual deficit against a mine-supply base that cannot respond quickly to price. Industrial demand outside of solar photovoltaics remains resilient to growing, investment demand is a swing factor that can re-engage quickly, and the gold-silver ratio still sits well above prior bull-cycle troughs. We set out the bullish case below, followed by the caveats a disciplined analyst should weigh against it.

1. A Structural Deficit That Is Not Closing

The silver market has run an annual supply deficit for six consecutive years. The 2026 forecast shortfall is approximately 46 Moz (Silver Institute / Metals Focus), and while this is the smallest deficit of the current run, it is a deficit nonetheless — demand continues to exceed combined mine and scrap supply. Cumulative drawdowns from above-ground stock since 2021 run into the hundreds of millions of ounces, equivalent to a substantial share of a full year's mine output. That inventory has to come from somewhere, and each year it does is a year the market has not found genuine equilibrium at prevailing prices.

Annual market balance, 2017–2026F (million ounces; negative = drawn from above-ground stock):

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026F

+53.3

+15.0

+11.1

+52.5

−83.7

−254.0

−200.1

−137.9

−40.3

−46.3

2. Mine Supply Is Structurally Inelastic

• Byproduct economics dominate the cost curve. Roughly 70% of global silver production is a byproduct of copper, zinc, lead, and gold mining. Primary silver mines are limited and fragmented, and the byproduct majority means supply decisions are driven by the economics of the host metal, not the price of silver itself.
• A decade of flat output. Global mine production has held broadly in an ~820–850 Moz band for ten years. Permitting timelines, capex cycles, and declining ore grades mean that even a sustained price well above $60 does not quickly bring on new primary supply.
• Isolated disruptions have not closed the gap. Modest 2025 output growth and localized disruptions in Mexico, Peru, and Chile have made no meaningful dent in the deficit. The supply side is, for practical purposes, fixed over any horizon a client should be positioning against.

3. Secular Industrial Demand From Electrification and Technology

• Still the largest demand block. Industrial fabrication remains roughly 55–60% of annual silver demand, and the composition is shifting toward less cyclical, more structural end-uses.
• Solar remains a net contributor despite thrifting. Even after a 2026 dip in per-cell silver intensity and softer Chinese offtake, cumulative PV installations continue to rise, and volume growth can offset intensity declines over a multi-year horizon.
• EVs carry meaningfully higher silver loading than ICE vehicles, and the vehicle mix continues to shift in silver's favor as EV penetration rises.
• AI, data-center, and power-grid buildout is a genuinely under-modeled demand line — hyperscaler capex guidance is running into the hundreds of billions of dollars annually, and this application thrifts far more slowly than solar paste.
• Electronics, 5G, and defense/military applications add further structural, less price-sensitive demand that does not show up in the headline PV and jewellery lines most commentary focuses on.

4. A Hybrid Industrial and Monetary Asset

• Silver rides gold's tailwinds with higher beta. Safe-haven flows, elevated fiscal deficits, geopolitical risk, and the prospect of a real-yield rollover if the Fed eases all support gold — and silver has historically outperformed gold on the way up given its smaller, more retail-driven float.
• Investment demand is a swing factor, not a constant. ETP net investment absorbed roughly 278 Moz in 2025 alone but is forecast to slow sharply in 2026, while coin and bar demand is forecast to grow. A re-engagement of ETP flow — which can move faster than any industrial fundamental — is the single largest lever available to the bull case even as some industrial segments soften.
• Paper-to-physical dynamics amplify moves in both directions. A market with a thin physical float relative to derivatives exposure does not need a change in fabrication demand to reprice sharply; it only needs a change in who wants to hold physical metal.

5. The Gold-Silver Ratio Still Offers Catch-Up Room

The ratio has normalized from the extreme compression seen around January's spike back toward the high 60s — near longer-run historical averages, but well above the sub-50 (and in prior cycles, sub-30) levels reached at past bull-market extremes. Sell-side desks are currently split on direction: some see the ratio drifting toward 70–75 as physical tightness unwinds, which would argue for silver underperforming gold near-term; others see any renewed gold rally or renewed physical tightness pulling silver harder on the upside, as has been the historical pattern. The point for positioning purposes is that the ratio has not compressed to bull-market extremes — there remains room for silver to re-rate against gold if the deficit narrative reasserts itself.

6. Above-Ground Inventories Are Tight Relative to Claims

Years of consecutive deficits have drawn down readily available above-ground stock. Registered COMEX inventory remains low relative to outstanding paper open interest, and London vault holdings — while rebuilt from their 2025 lows — remain heavily concentrated in ETP ownership rather than free-floating dealer stock. This combination does not require a change in industrial offtake to produce a squeeze; it only requires a renewed pull on physical metal from either investment or industrial restocking.

7. Limited Near-Term Substitution in High-Specification Uses

Silver's electrical and thermal conductivity remain effectively unmatched, and this keeps it difficult to displace in PV paste, high-reliability electronics, and select EV and power-delivery applications — even as manufacturers actively thrift loadings per unit. Volume growth across solar, EVs, and AI infrastructure can continue to offset intensity declines for several years before substitution, where it is even technically viable, reaches meaningful commercial scale.

Price Targets: Scenario Framework

The following ranges are a scenario framework, not a point forecast — they are built around the variables identified above (deficit persistence, ETP re-engagement, and the gold-silver ratio) rather than a single house view. They are intended to help frame risk/reward, not to be read as a prediction.

Horizon

Bear

Base

Bull

Short-term

(1–3 months)

$55 – $58

$62 – $68

$75 – $85

Medium-term

(6–12 months / through 2027)

$50 – $60

$70 – $85

$95 – $115

Long-term

(2028+, structural)

$60 – $75

$90 – $120

$130 – $180+

• Short-term (1–3 months). The base case tracks the current consolidation range and is anchored near sell-side revisions such as J.P. Morgan's mid-$60s call. Bear risk is a further gold-silver ratio drift toward 70–75 on a hawkish Fed; bull risk is a renewed lease-rate spike of the kind seen in October 2025 (lease rates briefly near 39%), which would not require any change in industrial data.
• Medium-term (6–12 months, through 2027). The base case sits close to the pre-cut sell-side consensus — J.P. Morgan's original 2026 average call was $81, and the Reuters analyst poll median stood near $79.50 — reflecting a view that the deficit persists and investment demand partially re-engages. The bear case assumes solar substitution and a stronger dollar dominate; the bull case assumes ETP absorption returns toward 2025's pace of roughly 278 Moz.
• Long-term (2028 and beyond, structural). This range is a function of cumulative deficit persistence and gold-silver ratio reversion rather than any single catalyst. The bull case assumes the ratio compresses back toward the 30–47 zone seen at prior bull-market extremes against a still-rising gold price; the January 2026 intraday print near $122 is evidence such levels are reachable in a tight-float environment, not a target in itself. The bear case assumes TOPCon copper metallisation reaches bankable scale, capping the industrial bid permanently.

Caveats: What a Disciplined Analyst Would Flag

• Solar thrifting and softer Chinese PV offtake are already cutting into industrial demand — this is observable in 2025–26 data, not a forecast risk.
• Jewellery and silverware demand are genuinely price-sensitive and have already declined double digits in 2026 as Indian consumers balk at record prices.
• A hawkish Fed, a stronger dollar, and higher real yields are headwinds to the monetary side of the thesis and would work against both gold and silver simultaneously.
• Sell-side forecasts have already been cut. J.P. Morgan's move toward the mid-$60s for late 2026 reflects a genuine reassessment, not a fringe view, and its research has also flagged that silver lacks gold's central-bank reserve-buyer backstop.

The bull case is therefore not a straight line back to $100+. It depends on the deficit persisting, investment flows re-engaging, and gold remaining supportive. Volatility should be expected to stay elevated in either direction.

Conclusion

The demand-destruction narrative correctly identifies a real and observable trend in solar silver intensity. It does not, on its own, resolve the supply side of the equation, the monetary bid, or the float dynamics that have driven silver's largest moves over the past two years. We view the current setup as a market digesting a genuine industrial headwind against an unresolved structural deficit and a still-wide gold-silver ratio — a combination that argues for a two-sided, volatility-aware positioning approach rather than conviction in either direction alone.

Sources: World Silver Survey 2026 (Metals Focus / The Silver Institute); J.P. Morgan Commodities Research; COMEX/LBMA exchange data. This note is prepared for informational purposes for institutional clients and does not constitute investment advice or a solicitation to buy or sell any security or commodity interest.