The Silver Market Deficit Continues: Demand Outstrips Supply for Fifth Straight Year
The silver market is forecasted to experience a deficit for the fifth consecutive year in 2025, with demand surpassing supply. The majority of existing above ground silver stocks are not available to meet this growing demand, regardless of price.
Analysis by the Silver Institute reveals that movements in silver prices do not necessarily correlate with changes in above ground stocks. Silver, once primarily used for store of wealth in items like bars, jewelry, and coins, has now evolved into an industrial metal that is mostly consumed or recycled, leading to a limited availability for market use.
This shortage of silver is concerning, especially considering the rising demand for industrial purposes. While movements in bullion stocks can impact silver prices and vice versa, the majority of above ground silver stocks remain stagnant, with minimal additions or subtractions annually.
According to the Silver Institute report:
– Increases in bullion stocks are often linked to price increases, as investment demand rises with higher prices.
– Drawdowns in bullion stocks tend to occur during bear markets, setting the stage for future rallies.
– Fabricated product stocks are less price-sensitive than bullion, with specific sectors like jewelry showing sensitivity to price fluctuations.
Ultimately, the growing demand for silver will rely heavily on mine output, which has plateaued in recent years. Despite a slight increase in silver production in 2024, it is not enough to meet demand due to reserve depletion, mine closures, and declining ore grades.
Silver mine output is expected to grow by 3 percent this year, but it will not be sufficient to bridge the demand gap, resulting in a projected 149 million-ounce market deficit. While this deficit is smaller compared to previous years, it remains significant historically.
In conclusion, the silver market continues to face deficits due to inadequate supply to meet rising demand. This trend suggests that silver is poised for potential growth and investment opportunities in the future.
Originally published on Money Metals.