In a recent episode of the Money Metals Midweek Memo, host Mike Maharrey explored a surprising disconnect in the silver market. Normally, declining demand would point to weaker prices. Instead, silver surged dramatically through late 2025 and into early 2026.
Maharrey explained that headline demand figures only tell part of the story. The deeper driver behind the rally was a tightening physical market that had been developing for years. By the time prices finally moved, the imbalance between supply and demand had already reached a breaking point.
He framed the situation simply. Markets do not always respond immediately to changing fundamentals. In silver’s case, years of strain built beneath the surface before erupting into a sharp price move.
The 2025 Silver Market in Numbers
According to final data from Metals Focus and the Silver Institute, total silver demand in 2025 came in at 1.13 billion ounces. That represented an overall decline of about 2% compared to the previous year.
Industrial demand fell by 3%, with electronics usage down 2%. Maharrey noted that growth in artificial intelligence infrastructure, automotive applications, and power grid investment helped support demand. However, weakness in the solar sector weighed heavily as rising silver prices pushed manufacturers toward substitution and reduced usage.
Jewelry demand also softened. Global silver jewelry demand dropped 8%, driven largely by a 20% decline in India, one of the world’s largest markets. China stood out as a notable exception, posting a 5% increase as consumers substituted silver for increasingly expensive gold.
Silverware demand fell even more sharply, declining 24% to a four-year low. Despite these declines, investment demand provided a key offset. Silver coin and bar demand rose 14% in 2025, helping stabilize overall consumption.
Maharrey highlighted a striking geographic divide in investment demand. The United States was the only major region that failed to see an increase in silver investment.
India led the world with a 33% rise in investment demand. Europe recorded its first increase in three years, while the Middle East and China saw strong gains driven by rising investor interest and relatively low starting points.
In contrast, US demand declined for a third consecutive year. Maharrey attributed this to reduced safe haven buying following President Donald Trump’s election, along with profit-taking during the early stages of the rally.
He connected this trend to broader patterns in precious metals markets. Asian investors have played a dominant role in driving demand, while Western investors have often been slower to respond until prices are already moving higher.
Supply Gains Were Not Enough
On the supply side, silver mine production rose 3% in 2025 to 846.6 million ounces. Recycling increased by 2% and reached its highest level in 12 years.
Even with these gains, total supply reached only 1.09 billion ounces. That left the market in deficit once again.
The 2025 shortfall totaled 40.2 million ounces, or 1,252 tons. This marked the fifth consecutive year in which global demand exceeded supply.
Maharrey emphasized that this persistent deficit is the key to understanding the price rally. Even as demand softened slightly and supply improved modestly, the market still could not produce enough silver to meet total needs.
A Multi-Year Deficit Finally Hit
The host stressed that the 2025 rally was not the result of a single year’s imbalance. It reflected the cumulative effect of years of deficits, finally catching up with the market.
Over the past five years, the silver market has accumulated a deficit of 716 million ounces. That figure is nearly equal to an entire year of global mine production.
Earlier in the decade, from 2010 to 2020, above-ground silver stocks increased by 243 million ounces. When recent deficits are factored in, Maharrey said the market has experienced a net stock decline of roughly 473 million ounces over the past 15 years.
This erosion of available inventory fundamentally changed market conditions. The cushion that once absorbed supply disruptions had largely disappeared, leaving the market far more sensitive to shifts in demand and logistics.
Silver’s Repricing Was Inevitable
Maharrey argued that silver had been undervalued for years, particularly when compared to gold. He pointed to the historically wide gold-to-silver ratio as evidence.
In modern markets, the ratio typically ranges between 40:1 and 60:1. Through most of 2025, it remained elevated near 91:1 and peaked at 107:1 in April.
By the end of the year, the ratio had fallen sharply to 61:1 and briefly dropped into the sub-50s in early 2026. This shift reflected silver catching up to gold after a prolonged period of underpricing.
He described the price surge as a straightforward supply and demand response. Holders of physical silver were unwilling to sell at lower prices, forcing buyers to bid higher until sufficient metal entered the market.
A Rapid and Powerful Rally
The speed of silver’s move was one of the most striking aspects of the market. Silver began 2025 at about $28.84 per ounce and remained below $40 until September.
The average price for 2025 was approximately $40, representing a 42% increase over the prior year’s average. While gold dominated headlines for much of the year, silver ultimately outperformed during the final months.
The rally continued into early 2026, briefly pushing silver above $100 per ounce before a correction brought it back into the $70 to $80 range.
The Silver Squeeze Explained
Maharrey identified October 2025 as the turning point when a full-scale silver squeeze took hold. Tight inventories collided with logistical disruptions and surging physical demand.
He traced the origins back to the spring of 2025, when tariff concerns triggered a large movement of silver from London to CME vaults in New York. Holdings in CME vaults climbed to 531 million ounces, surpassing pandemic-era records.
This shift created a mismatch in the global supply chain. Much of the remaining silver in London was already committed to exchange-traded products, leaving only 17% of inventory unallocated by late September.
At the same time, Indian demand surged as buyers turned to silver amid rising gold prices. Premiums in India, typically just a few cents above global levels, climbed as high as $5 per ounce.
This premium spike pulled additional silver into India, intensifying shortages in other regions. The result was a classic squeeze, with limited supply struggling to meet rapidly shifting demand.
Market Stress Became Visible
The strain in the market became evident through silver lease rates, which surged above 200% during the squeeze.
Although lease rates have since declined, they remain elevated by historical standards. Maharrey said this indicates that while short-term pressures have eased, the underlying tightness persists.
Some metal has flowed back into London vaults, helping rebalance supply. However, the fundamental issue remains unchanged. The market still lacks sufficient physical silver to comfortably meet demand.
According to Metals Focus, the market has entered an era of reduced inventories, thinner liquidity, and greater price volatility. This new environment is likely to produce larger and more frequent price swings.
Another Deficit Expected in 2026
Looking ahead, current forecasts point to a sixth consecutive supply deficit in 2026. The projected shortfall is 46.3 million ounces.
Maharrey noted that uncertainty remains high due to geopolitical factors, particularly the ongoing situation involving Iran. These developments could influence both industrial demand and investment behavior.
Even so, the baseline expectation is for continued structural tightness. Declines in industrial and jewelry demand may occur, but rising investment demand is expected to offset much of the weakness.
He added that higher prices could begin attracting more interest from North American investors, who have largely been absent from recent demand growth.
Investment Implications
Maharrey pointed to junk silver as one accessible way for investors to gain exposure. These are pre-1965 US dimes, quarters, and half dollars that contain 90% silver.
He noted that melt values for older quarters have reached around $14, highlighting the erosion of purchasing power in modern currency. He described junk silver as a practical entry point for physical investment.
With prices currently below recent highs and supply constraints still in place, he characterized the market as offering continued upside potential.
The driving force behind this forecast is what analysts call the debasement trade. Maharrey described this as the ongoing erosion of fiat currencies and a shift toward gold as a neutral reserve asset.
Wells Fargo estimates gold’s fair value at around $4,500 per ounce, with a base case of $6,000 to $6,300 in 2026. Their bearish scenario still places gold near $4,000, while most scenarios point to continued upside.
He linked this trend to strong central bank buying, rising global debt, and concerns about the US dollar’s role in the financial system. Gold has already surpassed the euro as the second-largest reserve asset and now accounts for a larger share of reserves than US Treasuries.
The Bottom Line
Maharrey concluded that the silver rally was not driven by rising demand alone, but by a prolonged supply imbalance that finally reached a tipping point.
Five consecutive years of deficits, a cumulative shortfall of 716 million ounces, and declining above-ground stocks created a market primed for a sharp repricing. When additional stress hit in 2025, the result was a rapid and powerful surge.
He argued that the same structural forces remain in place. With ongoing deficits and tightening inventories, silver and gold both stand to benefit in a world defined by supply constraints and currency debasement.
Our Service, Use, and Transaction Terms (“Terms”) and Privacy Policy (collectively, the “Policies”) govern your access to and use of this Website. By using the Website or engaging in transactions with Money Metals, you acknowledge that you have read and agree to be bound by the Policies, which are incorporated herein by reference. NOTICE REGARDING MARKET RISKS, ORDER ACCEPTANCE, AND CANCELATIONS: By placing an order online or over the phone with Money Money Metals Exchange, you agree to be bound by our Terms and liable for any and all losses in value of the items you ordered. You may not cancel any order after you place it with Money Metals. If you fail to follow through with timely payment on an order, you are responsible to Money Metals for any monetary damages (including, but not limited to, market losses, collection fees, setoffs, etc).
A message from Advisor Perspectives and VettaFi: Discover something new! Click here to register for our upcoming webcasts.
