Why Silver’s 2025 Surge Sparks Risk Now—and Opportunity Long Term

The silver market, having enjoyed one of its strongest years in recent memory, enters the turn of 2026 with a dual character: bullish longer-term fundamentals under stress from near-term risks. Three themes stand out as defining its outlook.

1. Policy Risks & Regulatory Supply Barriers
Effective January 1, 2026, China will require export licenses for refined silver, impacting roughly 60–70% of the world’s refined silver supply and ~121 million ounces of Chinese refined silver output annually [2][1]. Such licensing is likely to raise transaction costs, delay deliveries, and potentially restrict supply to non-approved entities. In parallel, the CME increased margin requirements for silver futures, reducing speculative flow and adding downward pressure on prices in the short term. These policy levers act like positive supply shocks from the physical market’s perspective.

2. Industrial Demand Remains Strong & Indeed Rising
The solar industry alone is projected to demand about 290 million ounces in 2025, climbing to approximately 450 million ounces by 2030, reflecting global PV capacity growth and minimal viable substitution [1][3]. Data center and AI demand also represent growing, inelastic new use-cases; Campbell phrases this as “every AI query needs electrons. The marginal electron is silver.” Substitution by copper is impeded by long payback periods (around 18 months), making shifts slow and costly [3].

3. Supply Constraints & Market Structure
Global silver supply is largely a byproduct of base metal mining; increases in production are slow and capital-intensive. Mine production forecasted for 2025 barely exceeds 1.03 billion ounces, while demand sits well above 1.15 billion ounces, yielding a structural deficit of over 100 million ounces [4]. Furthermore, physical silver is trading at substantial premiums over paper contracts—$85-91/oz in Shanghai and Dubai versus ~$75 on COMEX—while backwardation in London OTC markets reaches historic levels, signaling tightness and urgency in the physical delivery market [3].

Strategic Implications & Positioning
Investors should balance short-term volatility against long-term opportunity. Short-term risk includes tax-loss and profit-taking flows around year-end, dollar strength, and margin hikes; these may drive dips. Conversely, policy shifts, physical supply bottlenecks, and real demand growth propose a case for exposure to physical silver, silver-ETFs, and industrial supply chain stocks. Open questions include how stringently China will enforce licensing, how fast industries could substitute, and whether rising premiums will attract additional mining or refining investment.