Silver Prices Face Further Downside as Demand Destruction Sets In
CNBC reported Thursday that silver prices face further pressure after a stunning rally last year triggered widespread demand destruction among industrial buyers, with multiple major banks now warning the metal remains fundamentally overvalued.
A Historic Rally That Priced Out Buyers
Silver’s extraordinary run through 2025 — a gain of roughly 140% — has backfired on the metal’s near-term prospects. Analysts at UBS published a note on May 22 arguing that those elevated price levels are actively discouraging buyers across industries that rely on silver. The metal is a key input in everything from solar panels and electric vehicles to smartphones and computers. UBS analysts wrote that demand erosion is likely to persist as long as prices hold at current levels. The bank also noted that silver lacks the strategic demand anchor gold enjoys through central bank purchasing, making it more vulnerable to swings in both private investment and industrial appetite. UBS stopped short of recommending a long position, calling silver unappealing given its volatility relative to potential returns.
Silver’s 2026 Price Rollercoaster
The metal peaked on January 28 this year, briefly surging above $120 an ounce before collapsing nearly 30% in a single session. Prices found a 2026 floor around $67.60 in late March before partially recovering into mid-May near $87. A second wave of selling has since dragged silver back toward the $75-78 range. On Thursday, spot silver traded around $72.13 an ounce, a drop of approximately 3.7% on the day, with front-month futures matching that decline.
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Why Silver Diverges From Gold
Analysts at HSBC argued in a Thursday note that the gold-to-silver ratio is likely to widen further. The bank’s view is that even if gold rallies, silver may not follow given its stretched valuation. Meanwhile, strategists at Macquarie see little recovery potential in the near term. They anticipate the Federal Reserve will begin raising interest rates in the first half of 2027, adding downward pressure on precious metals broadly. Macquarie wrote that silver prices may stabilise around current levels for the remainder of the year, though volatility will remain until Middle East tensions ease. The analysts flagged meaningful downside risk if the broader macroeconomic picture worsens.
Background: Silver’s Industrial Identity Problem
Unlike gold, silver has never been adopted by central banks as a reserve asset. That structural gap has always made it more cyclically exposed. When manufacturing slows or prices spike beyond what buyers can absorb, industrial demand softens quickly. That dynamic is now firmly in play.
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