Illustration of polished silver bars and raw silver ore, with a flowing metallic form suggesting price volatility and solar panels in the background highlighting silver's industrial demand.

Silver has managed to be both a spectacular investment and a brutal one in the same year.

On January 29, 2026, spot silver reached a record US$121.64 an ounce. The following day it plunged nearly 28% to US$83.99, the largest one-day fall in data tracked by the London Stock Exchange Group going back to 1982. By September, silver was back around US$65.

Yet describing that as a collapse misses half the story. On September 17, spot silver rose 4.2% to US$65.60. A year earlier it had been around US$42, two years earlier about US$31, five years earlier roughly US$22, and a decade ago below US$19. Silver is therefore still about 57% above its level a year ago, more than twice its price two years ago and nearly three times its September 2021 price.

So what exactly is US$65 silver? A bargain after an enormous correction, or an expensive asset that remains deep inside a longer speculative boom?

The answer is considerably less obvious than either the silver bulls or bears tend to suggest.

The Bull Market Was Real, So Was the Speculation

Silver's advance did not begin in January.

The London Bullion Market Association says silver gained 144.82% during 2025. Its benchmark price averaged US$40.03 for the year, up about 42% from US$28.27 in 2024, and reached a high of US$74.84 on December 30.

There were genuine reasons for the rise. Gold was surging, investment money was flowing into precious metals and exchange-traded silver holdings increased. Inflation and concern about the future purchasing power of currencies also encouraged investors to seek hard assets.

Physical silver became unusually tight as well. During 2025, metal moved into U.S. futures warehouses amid tariff concerns, exchange-traded products absorbed bullion and available London liquidity shrank. By October, borrowing costs for physical silver had surged as the market experienced an exceptional squeeze.

By January 2026, however, the rally had attracted increasingly speculative money.

When the market finally turned on January 30, profit-taking, a stronger U.S. dollar and changing expectations for real interest rates after Kevin Warsh was nominated to lead the Federal Reserve helped trigger a violent liquidation of crowded long positions. Silver fell 27.7% that day.

The selloff continued when markets reopened on February 2. Silver dropped another 9.2% to US$76.81, leaving it about 37% below its record. Higher futures margin requirements added pressure as speculative positions were unwound.

But even that was not a straight-line collapse. Silver recovered to around US$94 by February 27, only to suffer another major setback in March. It fell 20.4% during March, despite rebounding to US$74.64 on the final day of the month, as the Iran war, higher oil prices and renewed inflation concerns pushed markets toward expectations of higher interest rates. By April 30, silver remained around US$74.

The journey from US$121 to US$65 therefore included enormous rallies as well as enormous falls. There is a fundamental case for silver, but it does not follow that every price silver reaches needs to be fundamentally justified.

Industrial Demand Is Huge, but It Is Falling

Silver's industrial demand remains one of the strongest parts of the investment case.

It is extensively used in electronics, electrical equipment, solar cells, automobiles, power grids and metal-joining alloys used in manufacturing. It is also increasingly used in infrastructure associated with data centres and artificial intelligence.

The scale is considerable. Industrial users consumed 657.4 million ounces in 2025, compared with global mine production of 846.6 million ounces. Industrial use was therefore equivalent to almost 78% of the amount of silver mined worldwide that year.

That does not mean 78% of newly mined silver literally went directly into industry. Recycling and existing above-ground stocks also supply the market.

Total silver demand reached about 1.13 billion ounces in 2025. But there is an inconvenient fact for the simplest version of the silver bull case: industrial demand actually fell about 3%, from 679 million ounces in 2024 to 657.4 million in 2025. Metals Focus currently forecasts another decline of roughly 3% in 2026, to 639.6 million ounces.

That does not mean industrial uses for silver are collapsing. Much of the decline is concentrated in solar.

Photovoltaic silver demand fell from 197.5 million ounces in 2024 to 186.6 million in 2025. The World Silver Survey forecasts a further fall to 151 million ounces in 2026, a decline of about 19%, as manufacturers use less silver per cell and increasingly substitute other materials.

J.P. Morgan's more recent August research also points to weakening photovoltaic demand and industrial destocking, particularly in China. Its analysis argues that the demand environment has softened materially since earlier in the year.

At the same time, demand associated with power grids, automobiles, electronics, AI and data-centre infrastructure continues to provide support.

So the more accurate conclusion is not that industrial demand for silver is disappearing. It is that growth in some new uses has not been enough to offset manufacturers finding ways to use less silver elsewhere, particularly in solar.

That demonstrates one of the oldest lessons in commodity markets: high prices change behaviour. Manufacturers use less, products are redesigned, substitutes become worthwhile and recycling becomes more attractive.

Silver's industrial demand is enormous, but it is not infinitely price insensitive.

Silver Supply Cannot Easily Respond, and the Market Remains in Deficit

The supply side may contain the stronger long-term argument.

Only about 26% of the world's mined silver came from primary silver operations in 2025. Roughly three-quarters was produced as a by-product of mining lead, zinc, copper and gold.

That matters because a higher silver price cannot automatically produce much more silver. If silver doubles in price, a copper producer does not necessarily open another copper mine simply to obtain the silver contained in its ore. Investment decisions still depend primarily on the economics of copper. The same applies to lead, zinc and gold operations.

Much of the world's silver production is therefore relatively slow to respond directly to the silver price.

But there is another side to that argument. Strong copper, lead, zinc or gold production can increase silver supply regardless of what silver itself is doing. High silver prices also encourage recycling.

Recycled supply rose to 197.6 million ounces in 2025 and is forecast to increase another 7% to 211.3 million ounces in 2026.

Despite that increase in recycling, the latest market forecast does not show a surge in newly mined silver. Mine production rose 3% to 846.6 million ounces in 2025, but is forecast to edge down about 0.3% to 844.1 million ounces in 2026.

Total supply is forecast to decline from about 1.09 billion ounces in 2025 to roughly 1.07 billion in 2026. Mine production is only expected to edge lower, so another important part of that decline is producer hedging. Hedging added about 44.7 million ounces to supply in 2025, but is forecast to contribute only around 10 million ounces in 2026 as unusually high levels of producer hedging normalise.

That creates an interesting contradiction. Industrial demand is forecast to fall and recycling is forecast to rise, yet the overall market deficit is expected to increase from 40.3 million ounces in 2025 to 46.3 million ounces in 2026. It would be the sixth consecutive annual deficit.

A deficit does not mean the world has run out of silver. It means current supply is insufficient to meet current demand, requiring metal accumulated in previous years to come back onto the market.

Repeated deficits can gradually reduce that buffer.

New Silver Is Coming, Just Not All at Once

New mines and expansions are adding supply in the higher-price environment.

Endeavour Silver's new Terronera mine in Mexico, which reached commercial production in October 2025, is expected to produce about 2.4 to 2.6 million ounces of silver in 2026. It produced 608,347 ounces in the second quarter while continuing its ramp-up.

Aya Gold & Silver's Zgounder mine in Morocco is also expanding, with 2026 guidance of 5.2 to 5.8 million ounces and record second-quarter production of 1.49 million ounces. Coeur Mining's expanded Rochester operation in Nevada is expected to produce another 6.4 to 7.8 million ounces this year.

The by-product story can also be seen clearly at China's Jiama copper-polymetallic mine. China Gold International expects Jiama to produce 4.18 to 4.82 million ounces of silver in 2026, despite silver not being the mine's principal metal.

These are meaningful additions, though they need perspective.

A new operation adding 2 or 5 million ounces matters to its owner. Against roughly 844 million ounces of expected global mine production and more than 1.1 billion ounces of total demand, however, individual projects are relatively small.

Most importantly, even after accounting for new mines and ramp-ups, Metals Focus still expects worldwide mine output to decline slightly in 2026.

Tight Does Not Mean Empty

The physical market also needs careful language.

London experienced genuine liquidity stress in 2025, but conditions subsequently improved.

By the end of March 2026, London vaults held around 884 million ounces of silver. Metals Focus estimated that about 28% was not tied to exchange-traded products and could potentially support market liquidity, compared with only about 17% during the severe tightness of September 2025.

Total London vault holdings have since increased further. The London Bullion Market Association reported 28,431 tonnes of silver in London vaults at the end of August 2026, equivalent to roughly 914 million ounces.

Metal returning from the United States, declining holdings in exchange-traded products and weaker Indian demand all helped ease the squeeze.

That does not make the recurring deficits irrelevant. Reduced above-ground stocks can make the market more vulnerable if investment demand suddenly accelerates again.

But there is an important difference between saying silver supply is structurally tight and saying the world is "running out of silver."

The evidence supports the first argument much better than the second.

Higher Rates Do Not Automatically Mean Lower Silver

The Federal Reserve raised its target range by a quarter percentage point on September 16 to 3.75% to 4.00%. Conventional wisdom says higher rates should hurt precious metals because silver pays no interest.

Silver rose 4.2% the next day as Treasury yields and the U.S. dollar retreated.

History also shows the relationship is not that simple. The Federal Reserve began raising rates from 1% in June 2004 and eventually reached 5.25% in June 2006. Over approximately the same period, silver rose from around US$6 to about US$11.

That does not mean rate increases are bullish for silver. Higher real yields can make non-yielding assets less attractive, while tight policy can strengthen the dollar, drain liquidity and weaken industrial activity.

But "rates up, silver down" is not a dependable trading rule.

Silver responds to the interaction between real interest rates, currencies, inflation expectations, industrial activity, investment flows and market positioning, not one variable at a time.

The Ghost of 1980 and 2011

Silver's history provides perhaps the strongest reason for caution.

During 1979, Nelson Bunker Hunt and William Herbert Hunt accumulated more than 43 million ounces of physical silver, while they and associated traders controlled futures contracts representing potential delivery of another 60 million ounces.

The U.S. Commodity Futures Trading Commission, or CFTC, later described the episode as an attempted market corner.

Silver had traded around US$6 at the beginning of 1979. The CFTC records a closing peak of US$48.70 on January 17, 1980, before the market collapsed as trading restrictions, margin requirements and forced liquidation took hold. By March 26, silver had fallen to US$15.80.

Different historical price series put the absolute 1980 peak slightly differently, including London prices near US$49.50. Either way, it was vastly more expensive in real terms than US$50 silver today.

Using the latest available U.S. Consumer Price Index for August 2026, since September data have not yet been published, the 1980 peak equates to approximately US$210 to US$213 an ounce in today's money.

Even January 2026's extraordinary US$121.64 record therefore remained well below the inflation-adjusted 1980 extreme.

Then came 2011.

There was no Hunt-style attempt to corner the market when silver again approached US$50 in April 2011.

That distinction matters. The 1980 episode showed what could happen when enormous concentrated positions distorted the physical and futures markets. The 2011 episode showed that silver did not require a market corner to become extraordinarily speculative and then retreat violently.

And 2026 has demonstrated the point again.

Silver can reach extraordinary prices. It does not have to stay there.

Can We Trust the Price Forecasts?

Current institutional forecasts are considerably less spectacular than some of the US$100 to US$150 predictions circulating around silver.

J.P. Morgan's latest public outlook, published in August, forecasts approximately US$63 an ounce in the fourth quarter of 2026, an average of US$70.60 for 2026, and US$63.90 for 2027.

What is more revealing is how quickly those forecasts changed.

In May, J.P. Morgan had expected silver to average US$84.30 in 2026 and US$85.80 in 2027. Its current 2027 forecast of US$63.90 is about 26% lower than the one it published only a few months earlier.

That does not prove J.P. Morgan is wrong. It demonstrates what a commodity-price forecast actually is: an estimate built on assumptions that can change rapidly.

The previous year provides an even better warning.

At the beginning of 2025, analysts participating in the London Bullion Market Association's annual survey expected silver to average US$32.86. It actually averaged US$40.03.

Even the survey's most bullish average forecast, US$36.50, was too low, while silver ultimately reached US$74.84.

Professional forecasters failed to anticipate the magnitude of the rise. That should make investors equally cautious about treating today's US$75, US$100 or US$150 forecasts as destinations rather than scenarios.

Buy, Sell or Accumulate?

At around US$65, silver is in an unusual position. It is about 46% below its January record, but it is also nearly three times the price it traded at five years ago.

The bullish case remains credible. Industrial consumption is still enormous despite falling from its peak. Most mine supply cannot respond directly to higher silver prices. The market is forecast to record a sixth consecutive annual deficit, and despite high prices and new projects, worldwide mine production is currently expected to decline slightly this year.

The cautious case is credible too. Industrial users are responding to high prices. Solar manufacturers are rapidly reducing their silver requirements. Recycling is increasing, new mines and expansions are adding supply, and London's acute physical tightness has eased.

Silver has also demonstrated what can happen when speculative enthusiasm overwhelms the market.

That makes a large one-off purchase partly a bet on timing.

For someone who has already decided they want long-term exposure to silver but cannot know whether the next major move will be toward US$50 or US$90, gradual accumulation can reduce the importance of choosing one perfect entry point.

Dollar-cost averaging does not make an expensive asset cheap, and it does not protect an investor if the underlying investment performs badly over the long term. It simply reduces the consequences of being spectacularly wrong about the day on which you decide to buy.

With silver, that is not a trivial consideration.

The strongest bullish argument may also be the market's strongest warning. Silver has genuine industrial demand, a constrained supply response and recurring deficits. Investment buying can suddenly tighten a relatively small physical market.

Those characteristics help explain why silver can move much further upward than investors expect. They also help explain why it can move much further downward.

At US$65, silver does not look obviously cheap, though the fundamentals do not establish that the bull market is necessarily finished either.

After a move from below US$30 to more than US$120, back below US$80, up toward US$94 and eventually back around US$65, confidence in any precise price target should be low.

Anyone buying because somebody says silver is "going to US$100" should remember one important fact.

Silver already went above US$120 this year.

Then it reminded everyone what kind of market it is.