Silver's historic 2025 surge is now working against the metal, with analysts at three major banks warning that elevated prices are eroding demand across key industrial end-markets and leaving the metal exposed to further selling.
Spot silver fell 3.7% to around US$72.13 per ounce (oz) on Thursday, extending a retreat that has seen prices shed roughly 40% from the January record high of $121.60/oz.
A 140% rally across 2025 has been deterring buyers across multiple industries, with UBS warning in a note published on 22 May that elevated price levels are beginning to structurally weigh on consumption.
"The demand erosion is likely to persist as long as prices remain at current levels," UBS analysts wrote.
UBS strategists Wayne Gordon and Dominic Schnider estimate that weaker demand from photovoltaics, silverware, and jewellery will collectively reduce consumption by around 50 million ounces this year.
The bank cut its full-year investment demand estimate from above 400 million oz to 300 million oz - which it described as "still generous given year-to-date outflows" - and slashed its year-end price target to $80/oz from $85 previously.
The industrial demand erosion is the critical distinction between silver and gold in the current environment.
Unlike gold, which benefits from robust central bank buying, silver lacks a strategic demand anchor and remains absent from official sector reserves, leaving it more exposed to shifts in private investment and industrial appetite, UBS noted.
HSBC analysts described silver as "fundamentally overvalued" in a note published Thursday and flagged the probability of divergence from gold going forward, arguing the gold-to-silver ratio is likely to widen even if gold continues to rally.
Macquarie's strategists are similarly circumspect on the near-term outlook.
The bank expects average silver prices to hold around current levels through the remainder of 2026, but flagged meaningful downside risk if the macro situation deteriorates - particularly while the Middle East conflict remains unresolved.
Macquarie also flagged that anticipated Federal Reserve rate hikes in the first half of 2027 would add further downward pressure on precious metals pricing.
The structural underpinning of the silver market does, however, complicate the bearish case.
The Silver Institute and Metals Focus project the silver market will run a sixth consecutive structural deficit in 2026, with the shortfall widening to 46.3 million oz from 40.3 million oz in 2025 - a 15% increase - even as total demand is expected to slip 2% on weaker industrial and jewellery consumption.
Since 2021, some 762 million troy ounces have been drawn from global stocks to cover successive supply-demand gaps, raising the spectre of a renewed liquidity squeeze if the drawdown continues at pace.
Bloomberg Intelligence analyst Mike McGlone has offered a more measured read, suggesting silver may languish between $50 and $100 for years as the market digests its rapid gains and awaits broader institutional participation.
Heraeus analysts noted the rally had taken prices too high too quickly and that a period of consolidation was likely once momentum waned - though they added that a sustained gold rally could pull silver higher regardless of the industrial demand picture.
For now, the path of least resistance is lower, with the demand destruction thesis from UBS, HSBC, and Macquarie converging on the same conclusion: silver's industrial sensitivity, absent a fresh macro catalyst, leaves it structurally more vulnerable than gold at these price levels.
