A new report authored by Deutsche Bank indicates that a decline in the industrial demand for silver, as well as growing supply, could cause the precious metal’s market to shift from being in a deficit to one characterized by oversupply as soon as 2027.
Daniel Ghali, a metals analyst at the bank, writes in the report that silver’s spot price could average $70 an ounce by Q2 of 2027. He adds that as the supply squeeze eases, silver could find it hard to see its price rise at the same pace as that of gold, potentially leading to a higher gold-silver ratio.
Currently, silver is trading in the $60-$61 range. The outlook published by Deutsche Bank captures a change in the supply situation from a year ago, in October 2025. During that time, supply was so tight on the LME that borrowing costs skyrocketed. That supply tightness, coupled with safe-haven acquisition and geopolitical turmoil caused silver prices to shoot up rapidly to hit a peak of $120 an ounce at the beginning of 2026.
Ghali writes that the peak of silver’s supply scarcity is now a thing of the past. To illustrate this view, the analyst points out in the bank’s report that the LME now has freely available silver amounting to at least 300 million ounces in its vaults. This is an increase of 70% from the freely available silver supply one year ago.
Chicago and Shanghai are also seeing available inventories rising, which shows that all major metals markets are seeing an increase in physical metal. Those supplies are sufficient enough to address any sudden supply crunches that could arise.
Those growing inventories are putting to rest any concerns that may have existed regarding supply sufficiency, and that is likely to put a damper on how fast and how high prices could rise.
Another factor impacting the silver market is the growing use of manufacturing techniques that require smaller amounts of silver than were required in the past. This so-called “thrifting” is reducing the amount of silver needed for manufacturing products like solar panels in China.
Thrifting gained urgency when silver prices rose so fast to reach record levels, exerting pressure on manufacturing costs and creating an urgency to implement manufacturing approaches that cut how much silver goes into each finished product.
The resultant demand destruction is helping convert a market that was known for supply shortages into one where a surplus is now possible in the near-term.
On the plus side, investment demand could provide support to the silver market. This is because precious metals are in a structural bull market as geopolitical tensions persist, de-dollarization continues, and concerns about growing government deficits push investors to add more precious metals to their portfolios in order to shield their investments from the risks linked to fiscal policy.
The outlook for the metal may therefore be less cloudy than the oversupply in Deutsche Bank’s report may suggest. All the same, investors, traders and firms like New Pacific Metals Corp. (NYSE American: NEWP) (TSX: NUAG) need to keep a close eye on the different market drivers to avoid being caught off-guard in case the market shifts suddenly.
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