Photographer: Akos Stiller/Bloomberg
(Bloomberg) — Silver jumped, extending a run of elevated volatility, as an industry body pointed to stronger investment buying and weaker industrial demand in the year ahead.
The metal rose as much as 6.8% on Wednesday, about one-third higher than last week’s low. The silver market will be in deficit for a sixth consecutive year, according to a report published by the Silver Institute, as surging investment outweighs wilting demand for jewelry and efforts to curb use in the solar sector.
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Silver has been on a wild ride over the past year, more than doubling in price on a wave of investor money. That rally came to an abrupt halt with the biggest daily fall on record at the end of January. Prices have recovered somewhat since then, but remain volatile enough for some traders to dub the metal untradeable.
Industrial demand for silver is forecast to decline modestly in 2026. Despite continued growth in solar photovoltaic installations, “ongoing thrifting and outright substitution away from silver will result in falling silver PV demand,” the Silver Institute said.
Demand for the metal in silverware is set to fall by 17% as a result of higher prices, while jewelry is forecast to fall 9%.
While a wave of investors is expected to lead to a shift in existing silver inventories, it’s wrong to see the market as being in “deficit,” according to analysts at BMO Capital Markets. A better metric is how the supply of silver compares to the actual consumption of the metal for ornamental or industrial purchases, demand that removes bullion from the market.
BMO sees silver becoming cheaper relative to gold in the coming years, as physical availability of the metal improves.
Much of the speculative demand for silver in recent months has come from China. Domestic producers and traders in the country are currently struggling to fill a backlog of orders, pushing the front-month contract on the Shanghai Futures Exchange to a record premium.
Elsewhere, gold pared gains after a January jobs report beat expectations, reinforcing expectations that the Federal Reserve will hold rates steady in the near future, with traders fully pricing in a cut by July compared with a June cut prior to the jobs report. Steady rates are negative for non-yielding bullion.