Silver slides to two-month low under $67 after strong US jobs data and Iran-Israel escalation, yet supply deficit and AI data center demand offer long-term support.
Yet beneath the price weakness, the physical market is telling a very different story. The global silver market is heading into its sixth consecutive year of supply deficit. In 2026, the shortfall is expected to widen to 46.3 million ounces, up from 40.3 million last year, even as total supply rises to a decade-high of 1.05 billion ounces — a 1.5% increase. Mine output is forecast at 820 million ounces, but ramping up production is difficult because 70-80% of global silver is produced as a by-product of copper, lead and zinc mining. Dedicated silver mines are rare, and output cannot be quickly expanded in response to price signals.
Demand patterns are shifting. The photovoltaic sector, long the largest industrial consumer of silver, is scaling back usage as the metal’s share of cell costs has jumped from around 8% to over 20%. Producers are economising, dragging total industrial demand down 3% to 639.6 million ounces in 2026. But elsewhere, demand is accelerating. The build-out of AI data centres is creating a new, price-inelastic source of consumption: silver is used in switchgear, power distribution, connectors and thermal management systems. This niche is growing 15-25% annually, adding 20-30 million ounces of additional demand each year. Notably, data centre operators do not adjust their orders based on the silver price
stacking physical on the takedowns
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