Silver Holds Above $74 Amid Historic Supply Crunch
Silver prices steadied at $74.43 per ounce on Monday morning, marking a modest pullback from the historic highs reached earlier this year while remaining well above levels seen just twelve months ago. The precious metal has gained an extraordinary 129% compared to February 2025, when it traded near $32.39.
The current price represents a 3.3% decline from yesterday's close of $76.97 and sits 17.4% below the $90.11 level recorded one month ago. Despite recent volatility, silver remains up approximately 16% year-to-date after posting its strongest annual performance since 1979 last year.
Sixth Consecutive Year of Supply Deficit
The Silver Institute, citing analysis from London-based consultancy Metals Focus, projects the global silver market will experience a 67 million ounce shortfall in 2026. This marks the sixth consecutive year of structural deficit, a persistent imbalance that has defined the market since 2021.
Total global silver supply is forecast to increase by 1.5% this year, reaching a decade high of 1.05 billion ounces. Mine production specifically is expected to grow 1% to approximately 820 million ounces, driven by stronger output from existing operations and newly commissioned projects.
Mexico continues to lead production growth from primary silver mines, while China expects higher output from China Gold International's Jiama polymetallic mine as plant expansion continues.
Investment Demand Surges as Industrial Use Softens
Physical investment demand represents the bright spot in the 2026 outlook. The Silver Institute projects a 20% increase to 227 million ounces, reaching a three-year high. After three consecutive annual declines, western retail demand is expected to rebound as investors respond to silver's price momentum and persistent macroeconomic risks.
However, industrial fabrication faces headwinds. The largest component of silver demand is projected to decline 2% to around 650 million ounces, marking a four-year low. The photovoltaic sector, which had been a major demand driver, is expected to contribute most of the weakness.
Jewelry demand is forecast to fall more than 9% to 178 million ounces, the lowest level since 2020, as consumers respond to elevated prices.
What Drove the January Surge to $100
Silver breached the psychologically important $100 level for the first time in January 2026, fueled by a combination of factors including ongoing U.S. tariff concerns, strong investment demand, and the persistent fundamental deficit.
The rally proved unsustainable in the short term, with silver losing nearly 30% in its biggest single-day decline since 1980 during a late-January selloff. Gold similarly dropped 9% during the same period.
Market Outlook
Despite the recent correction, many analysts remain constructive on precious metals. UBS strategists characterized the selloff as "normal volatility within a continuing structural uptrend, rather than the end of the bull market."
Central bank demand continues to provide support, with the People's Bank of China extending its gold purchases for the 15th consecutive month in January. Meanwhile, the Federal Reserve appears likely to hold rates steady at 3.50-3.75%, with CME Group data showing only a 21.1% probability of a March rate cut.
The Silver Institute notes that even with higher supply and increased recycling, the global silver market will continue relying on drawdowns of aboveground bullion inventories to bridge the supply gap. For investors, this structural imbalance suggests the bull market in silver may have further room to run despite near-term volatility.
Sources: Silver Institute, Fortune, Metals Focus, Money Metals Exchange, CNBC, UBS Research