Silver’s New Era: Supply Deficits Meet Exploding Industrial Demand

Silver has experienced a wild ride in 2026, but The Silver Institute President and CEO Michael DiRienzo said investors should not let the volatility obscure a larger story: the underlying silver market remains strong.

DiRienzo joined Money Metals podcast host Mike Maharrey to discuss silver’s dramatic price swings, persistent supply deficits, industrial demand, solar energy, artificial intelligence, investment flows, and the metal’s growing role in medicine. The Silver Institute is an international industry association whose members include silver miners, refiners, and fabricators, and it publishes the World Silver Survey, an annual market study prepared with the research firm Metals Focus.

His central message was clear. Silver is no longer the $13 or $15 metal investors remember from less than a decade ago. In DiRienzo’s view, the market has established much higher price floors because silver is increasingly being valued for both its industrial utility and its investment appeal.

(Interview starts around the 7:21 mark.)

From $121 Silver Back to $65

Silver surged to roughly $121 an ounce on January 29, 2026, before falling sharply along with gold. By the morning of Maharrey’s interview with DiRienzo, silver was trading near $65 per ounce.

DiRienzo said the outbreak of war in Iran in late February added pressure to precious metals. He noted that gold and silver have tended to react positively to announcements involving ceasefires or the reopening of the straits, suggesting the conflict has been weighing on the precious metals complex rather than delivering the usual geopolitical boost investors might expect.

Even so, DiRienzo said the fundamentals remain strong.

He pointed out that just two years ago, an average 2026 silver price above $72 to $75 per ounce would have sounded extraordinary. Yet the market has already reached that neighborhood this year.

Mining companies have also benefited from higher prices. DiRienzo said second-quarter results reported by mining companies were broadly positive, including among Silver Institute members that produce silver both as a primary product and as a byproduct.

Industrial Demand Remains a Powerful Force

Industrial demand remains one of the key pillars supporting silver.

The Silver Institute expects a slight decline in industrial demand this year, driven in part by lower silver use in photovoltaics. With silver prices elevated, solar manufacturers have a clear incentive to reduce the amount of silver they use or to substitute other materials.

But that is not simple.

Silver has the highest electrical conductivity of any metal, and the process of screen-printing silver paste onto solar cells is already mature and highly efficient. Alternative materials and metallization technologies still face obstacles before they can compete with silver at scale.

Copper metallization, for example, exists, but DiRienzo said it has not scaled enough to replace silver across the solar industry. For solar farms designed to operate for 25 years, manufacturers must also weigh silver’s reliability, durability, and stability, not just its upfront cost.

Solar’s Silver Appetite Has Expanded Sharply

The scale of silver consumption in solar has changed dramatically over the past decade.

DiRienzo said solar accounted for about 11% of total silver industrial demand in 2014. By 2024, that share had risen to just under 30%, which marked the peak year for silver consumption in solar to date.

The industry is now trying to engineer some silver out of its cells as prices rise. But manufacturers were already working to reduce silver consumption when the metal traded at only $13 per ounce.

As DiRienzo explained, manufacturers relentlessly pursue even small savings. Cutting costs by two, three, or four cents per solar cell can matter when production runs are measured in enormous volumes.

That means efforts to use less silver will continue. Still, DiRienzo does not expect silver to disappear from photovoltaics the way photographic demand largely disappeared with the shift to digital photography.

AI Could Become Another Major Silver Demand Driver

Artificial intelligence may become another significant source of future silver demand.

The AI boom requires a large physical infrastructure of data centers filled with electrical contacts, wiring, and other components that can use silver.

DiRienzo said data centers have grown by more than 6,000% in just three years. The Silver Institute has already examined silver’s role in AI data centers and other emerging technologies in a report describing silver as a “next generation metal.”

The exact amount of silver being used by AI infrastructure remains difficult to measure. DiRienzo acknowledged that the Institute is hearing about increased consumption, but it does not yet have firm numbers.

Still, the direction appears clear to him. With AI infrastructure still in its early stages and data-center installations expanding around the world, DiRienzo expects silver demand from the sector to grow.

Higher Gold Prices Are Also Affecting Jewelry

Silver may also be benefiting indirectly from gold’s elevated price.

DiRienzo pointed to jewelry that is made mainly from silver and then plated with gold, giving the appearance of gold while using silver as the base metal.

Jewelry demand remains highly price-sensitive because it is fundamentally discretionary. DiRienzo also highlighted a demographic trend: more women between the ages of 24 and 30 are buying silver jewelry globally.

The Silver Institute expects overall silver jewelry demand this year to remain broadly in line with last year’s level.

Higher Prices Cannot Quickly Produce More Silver

The supply side of the market presents a very different challenge.

A silver miner cannot simply flip a switch and dramatically increase production because prices have risen. DiRienzo noted that some of the mining happening today traces back to plans made 10 years ago, in 2016.

That slow response is compounded by how silver is produced: a large share of the metal is recovered as a byproduct of mining copper, lead, zinc, and gold, so much silver output depends on development decisions made for other metals rather than for silver itself.

Mining companies are spending more on exploration, but DiRienzo said they are not doing so recklessly. Much of the activity appears focused on existing projects as companies search for additional or previously unidentified veins.

That means much higher silver prices are not necessarily going to unleash a flood of new supply anytime soon.

Mine production increased about 3% in 2025, but the Silver Institute expects production to decline 0.3% in 2026.

A Sixth Consecutive Silver Market Deficit

The supply constraint becomes even more important when viewed alongside persistent demand.

The Silver Institute expects the silver market to record its sixth consecutive annual structural deficit in 2026. DiRienzo estimated the shortfall at roughly 46 million to 50 million ounces, though he said it could widen if demand strengthens.

Recycling will help. The Institute expects recycled silver supply to rise by roughly 7% this year.

Even so, it will not be enough.

After factoring recycling into total supply, DiRienzo still expects demand to exceed supply again in 2026.

A market deficit does not mean the world has literally run out of silver. It means annual demand is greater than annual newly available supply, forcing the market to draw on above-ground inventories.

Those inventories are not necessarily as freely available as headline numbers may suggest.

The Silver Sitting in Vaults Is Not Necessarily Available

DiRienzo used London inventories to illustrate the issue.

If London Bullion Market Association vaults — whose silver holdings are reported monthly — contain about 750 million ounces of silver, that sounds like an enormous stockpile.

But DiRienzo estimated that roughly 75% of that silver is already allocated to exchange-traded products around the world.

That leaves a much smaller amount of metal that is readily available, and access to that remaining “free float” can be highly price sensitive.

The consequences became visible when tariff concerns caused silver to move from London and other locations into New York ahead of the April 2, 2025, “Liberation Day” tariff announcement.

Precious metals were ultimately not included in the tariffs, but the episode showed how quickly physical metal can move when market participants anticipate disruptions.

Maharrey pointed to another example closer to home: Money Metals was shipping 1,000-ounce silver bars to India during the tight market around Diwali.

DiRienzo recalled that episode and said silver lease rates later surged as the market tightened sharply.

Could similar silver squeezes happen again?

“Absolutely,” DiRienzo said. “No question about it.”

Silver Investment Demand Could Strengthen

The Silver Institute also expects stronger retail investment demand for physical silver.

DiRienzo said demand for silver coins and bars could rise by about 7% in 2026, despite challenges related to Indian import duties. India has been a particularly strong market for silver bars and coins over the past several years.

Exchange-traded products tell another part of the investment story.

Silver ETPs recorded net inflows of about 270 million ounces in 2025. The outbreak of war later contributed to liquidations in gold and silver ETPs, and DiRienzo said silver had seen outflows of roughly 6% this year.

He added that the Silver Institute was hearing that investment activity was starting to pick up again.

Medicine Shows Another Side of Silver

When Maharrey asked DiRienzo to name one of silver’s lesser-known uses that he finds especially interesting, DiRienzo pointed to health and medicine.

Silver’s antibacterial properties give it uses across healthcare settings. DiRienzo cited silver coatings in operating rooms, on operating tables and instruments, and in hospital drapes, as well as silver used alongside cleaning agents.

He also highlighted emerging nanotechnology. The Silver Institute’s August edition of Silver News was set to examine how nanosilver can help doctors administer the correct drug dosage.

Silver’s antibacterial properties also extend beyond hospitals. DiRienzo cited water purification, pools, and efforts to combat outbreaks of Legionnaires’ disease. In these uses, silver can help prevent infection and promote healing.

These applications may use relatively small amounts of silver compared with solar panels, electronics, or investment products, but they show how broad the metal’s usefulness has become.

From $15 to More Than $70

Perhaps the clearest way to understand today’s silver market is to look back.

During the interview, DiRienzo opened the World Silver Survey and read a series of historical average prices.

Silver averaged $17.05 per ounce in 2017. It then averaged $15.71, followed by $16.21 in 2019. By 2023, the average had risen to $23.35, followed by $28.27 in 2024 and about $40 in 2025.

In 2026, DiRienzo said the market is talking about an average above $70 per ounce.

That longer-term view matters after silver’s retreat from its January peak.

At around $65 an ounce during the interview, silver was far below its $121 high. But Maharrey noted that it was not long ago that investors were accustomed to silver trading at $13, $14, or $15.

DiRienzo said the difference reflects a structural change in the market.

“We think new floors have been set in the market,” he said. In his view, silver is now trading on the strength of both its industrial uses and its investment appeal.

A Tight Market With Strong Long-Term Drivers

Silver’s 2026 correction may dominate short-term investor attention, but the fundamentals DiRienzo described point to a much larger story.

The market is headed toward a sixth consecutive structural deficit. Mine production is expected to slip slightly. Recycling is rising, but not enough to close the gap. Physical investment demand could increase 7%. Solar still consumes large amounts of silver despite ongoing efforts to reduce usage. AI infrastructure is emerging as another rapidly growing source of potential demand.

At the same time, much of the silver held above ground is not necessarily freely available to the market.

DiRienzo believes 2026 is shaping up to be a remarkable year for the metal. He expects the annual average silver price to set a record, and he sees evidence that the market has established price floors well above those of the previous decade.

Silver may still be volatile. But in DiRienzo’s view, today’s market is fundamentally different from the one investors knew when the metal traded in the teens.

Those fundamentals — industrial demand on one side and investment demand on the other — could continue shaping the silver market long after the geopolitical turbulence of 2026 has passed.