Five years of structural supply deficits, new solar technologies that consume more silver rather than less, and deeply price-inelastic demand are all signs that tell us that a silver price at $100/oz is within reach over the next year.
Around 80% of silver isn't mined for its own sake. It comes out of the ground as a byproduct when miners dig for copper, zinc, and lead. So when silver demand spikes, as is happening now, producers can't just ramp up silver output to meet it. They're at the mercy of what's happening in other metals markets.
That mismatch between rising demand and unresponsive supply is exactly what’s gearing us up for a price squeeze.
In this week's Impactfull Weekly, and this year's last, we're diving into how silver has evolved from playing second fiddle to gold to becoming a critical input for the AI buildout itself. Each server cabinet requires roughly 1.2kg of silver for computing hardware, electrical components, and thermal management.
That's before we even get to solar panels, EVs, and the broader electrification wave. We look at what silver is, how it's mined, what's driving our thesis, and the risks to watch out for.
How silver goes from mining byproduct to your portfolio
Mining
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Silver's production geography is concentrated in a handful of countries that together control the global supply chain. Mexico dominates at 186 million ounces annually, representing 23% of world production, followed by China (110 Moz), Peru (108 Moz), Bolivia (48 Moz), and Chile (43 Moz). Total global mine production reached 820 million ounces in 2024, a modest 0.9% increase but still below the peak achieved in 2016.
Only 27-28% comes from dedicated silver mines: operations like Fresnillo's Mexican flagship plant, one of the world’s oldest continually operated mines where silver is the primary target.
The remaining 70-75% emerges as a byproduct. Lead and zinc mines contribute 29.4% of production, copper mines add 26.8%, and gold operations provide another 15.5%. This byproduct dependency creates profound supply inelasticity. When silver prices rise, copper miners do not suddenly decide to produce more copper to capture higher silver credits.
Supply decisions are made by unit economics behind each metal and previous investment in extracting proven assets, not by switching up from one metal to another.
The concentration in the biggest silver mines is also reason for its price inelasticity: Poland's KGHM Complex produces 43 million ounces (Moz) annually as a copper byproduct, while Newmont's Peñasquito in Mexico generates 33 Moz from polymetallic ore. Fresnillo's Juanicipio joint venture with MAG Silver delivers 19 Moz at an astonishing $2.04/oz all-in sustaining cost.
Refining
The London Bullion Market Association sets global refining standards, accrediting 81 refiners capable of producing "Good Delivery" bars meeting 999 fineness (99.9% pure).
If you’ve ever bought silver jewellery, you would be familiar with terms like 999 Fine Silver, or seen coins, biscuits or bars with logos from refiners like PAMP, Valcambi, etc. who are the major players in silver refining, mostly concentrated in Switzerland.
However, other refiners like Heraeus from Germany, Tanaka Kikinzoku from Japan and Industrias Peñoles from Mexico (tied to the Fresnillo mines, vertically integrated) round out the Tier-1 players in this ecosystem.
Refining itself does not represent a meaningful bottleneck today, though concentrate treatment capacity at smelters can lag during rapid production increases. Environmental compliance costs have risen 15-20% annually according to Ernst & Young, pressuring margins at smaller refiners. The more significant constraint is upstream at the mining stage.
Silver’s dual personality
Silver has in itself a dual-track dynamic: one driven by industrials as silver paste is one of the most crucial ingredients in photovoltaic (solar) cells, and the other is financial, as silver continues its historic monetary role.
When gold prices reached an ATH earlier this year, retail investors flocked to silver as a ‘more accessible’ refuge of value.
Industrial:
Industrial applications consumed 665 Moz (59% of demand), driven by electronics and electrical uses at 466 Moz.
Within this category, photovoltaic demand reached 188-196 million ounces, representing 17-18% of total consumption and approximately 29% of industrial demand. This is up from just 5.6% of total demand in 2015.
Silver paste forms the conductive layer on solar cells, carrying electrical current with maximum efficiency due to silver's unmatched conductivity properties.
Older solar panel designs set a baseline for how much silver each cell needs.
However, newer, more efficient designs like TOPCon use significantly more silver per panel. The latest generation of panels requires roughly 50% more silver per cell, and the next wave coming through could nearly double that again.
Manufacturers have been working hard to trim silver usage with a technique called thrifting, and they've made progress: silver per unit of output dropped around 10-15% over the past year. But it hasn't been enough.
With global solar installations on track to hit a record 694 GW in 2025, the sheer volume of panels being produced means total silver demand keeps climbing regardless.
Electric vehicles add another structural demand driver. Each battery electric vehicle contains 25-50 grams of silver, which is up to 80% more than in conventional internal combustion vehicles.
Financial:
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Physical coins and bars absorbed 182 Moz in 2025, a seven-year low and down 4% from 2024 as elevated prices deterred retail buying in Western markets.
However, India saw strong festive and wedding season demand, as a substitute to expensive gold, with October 2025 imports alone reaching 1,700 tonnes ($2.71 billion), up 529% year-over-year following the import duty cut from 15% to 6% in September.
Total ETF value exceeded $40 billion in June 2025, setting a new record. ETF silver now significantly exceeds available London vault inventory, representing a dominant claim on above-ground supply.
All in all, jewellery and silverware together consumed approximately 246 Moz.
Why is silver still underpriced and what are its growth drivers?
Despite doubling in price since the US Government added silver to its “critical minerals” list last month, we believe that the expansion of supply is still quite weak to warrant a correction in the price, and this governmental demand only sets a demand floor of about $70/oz through 2026 at minimum.
The market picture makes more sense when you consider the massive transfer of physical silver: China’s domestic silver reserves have hit all-time lows just as London’s LBMA vaults are reporting record-breaking inflows, sitting at 27,187 tonnes (up 3.5% from October).
Mining deficit
The silver market closes 2025 posting its fifth consecutive annual deficit of 117 Moz.
Cumulative deficits from 2021-2025 now total approximately 820 million ounces, equivalent to roughly ten months of global mine production or 25,000 metric tonnes. This persistent shortfall has drawn down identifiable inventories across major trading centres.
The estimated "free float" available for purchase in London is only approximately 140 Moz, with the remainder tied to ETF holdings. Lease rates spiked to 30-40% annualised in October 2025, making the scarcity pinch harder.
Shanghai Futures Exchange stockpiles collapsed to 900 tonnes (29 Moz) in December 2025, the lowest level since July 2016 and down 86% from the 2020 peak of 3,091 tonnes. This reflects intense Chinese industrial consumption ahead of export controls.
On the COMEX Silver Futures market however, registered (deliverable) inventory stood at just 113 Moz in late November, and over 60% of registered inventory was claimed through delivery requests in the first four trading days of December alone.
Unlike many commodities, silver lacks substantial strategic reserves.
No government maintains significant silver stockpiles comparable to petroleum reserves or central bank gold holdings. When physical supply tightens, there is no cavalry arriving from government warehouses.
Industrial demand
Solar silver consumption has grown 5x since 2015, rising from 5% to nearly 29% of industrial demand. The Silver Institute now projects PV could consume 400+ Moz annually by 2030, exceeding 45% of current mine production.
AI Infrastructure
AI infrastructure also adds a demand vector that barely existed two years ago.
Data centre IT power capacity has grown 5,252% since 2000, from 0.93 GW to nearly 50 GW. Each server cabinet requires approximately 1.2 kgs of silver for computing hardware, electrical components, and thermal management. Governments worldwide are fast-tracking data centre approvals as critical infrastructure, insulating this demand from typical business cycle weakness.
More on this in our previous Impactfull Weeklies:
OpenAI Infra: https://globalmacroequity.substack.com/p/impactfull-weekly-9-openais-infra
End of an Era for AI Infra: https://globalmacroequity.substack.com/p/impactfull-weekly-4-end-of-an-era
Gold-silver ratio
Gold's relationship to silver provides a valuation framework dating back millennia. The ratio compressed sharply during 2025, falling from over 100:1 in early 2024 to approximately 65:1 by December 2025. It might seem that silver is finally catching up to gold’s rally…not so fast.
The ratio averaged 80-90:1 over recent years, well above the 25-year mean of 65-67:1. It dropped to 30:1 when silver hit $50 in 2011, reached 15:1 during the Hunt Brothers squeeze in 1980, and historically traded around 12-15:1 in ancient times.
The current ratio near 65:1 represents a return toward historical norms, but remains above the 50:1 levels seen in strong precious metals bull markets.
This mean reversion still has further to run. With gold at $4,500/oz, a compression to 50:1 would mean $90 silver.
A return to 2011's 30:1 ratio with gold at $5,000 implies silver’s price at $167.
Historical pattern analysis shows that when the ratio exceeds 80:1, silver's median one-year forward return is +57%, and silver outperformed gold in 93% of such cases. This 2025 rally validates the pattern.
What can go wrong (and what to watch)
Despite the structural tailwinds propelling silver to potentially hit $100/oz in 2026, there are some signs of demand weakness and supply issues loosening up that we must keep in mind in addition to technological replacement risks.
Solar substitution
Photovoltaic players are aggressively targeting silver’s multibillion-dollar cost.
AIKO Solar has successfully mass-produced ABC (All-Back Contact) modules using copper interconnections, achieving a record 24.8% commercial efficiency in late 2025, leveraging copper's 100x lower cost with enough conductivity competitiveness.
However, copper substitution is not a "drop-in" replacement. Oxidation and adhesion problems continue to plague copper in TOPCon cells, the market's dominant architecture.
Manufacturers facing thin margins are prioritising incremental improvements to proven silver pastes over the high CapEx required for unproven plating lines.
The shift to silver-intensive architectures, combined with China installing a record 329 GW in 2024 and global deployment targeting 655 GW in 2025, is overwhelming gains made by “thrifting”, the process of reducing silver content per cell to cut costs & maintain efficiency.
Tl;dr: copper alternatives are gaining traction for specific cell types but will not meaningfully displace silver in the mainstream utility-scale market this decade.
High-beta trap
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Silver rarely decouples from gold’s gravity for long periods.
Though the industrial deficit has provided a fundamental floor, the speculative ceiling is dictated by investment flows into the broader precious metals complex.
If gold corrects 30% due to easing geopolitical tension or a resurgence in real yields, silver will almost certainly suffer a steeper decline.
Institutional algorithms and macro funds trade silver as a high-beta proxy for gold rather than a standalone commodity.
A breakdown in the yellow metal triggers automatic liquidation in silver futures to cover margin, often worsening downside volatility by 2x. The narrative of silver decoupling from its monetary anchor has historically failed during major liquidity events.
Tl;dr: silver amplifies gold's movements and a crash in the monetary anchor will drag silver down regardless of physical tightness.
Recession
The $100 thesis relies on a resilient global economy capable of absorbing higher input costs without destroying demand.
A severe recession in 2026 presents the most direct threat to the physical deficit narrative as it attacks the "industrial" half of the equation.
Approximately 40% of silver demand stems from highly cyclical sectors outside of solar, such as consumer electronics and brazing alloys.
A sharp contraction in global manufacturing would rapidly erase the perceived structural shortage. What’s more, during credit crunches, industrial commodities are often sold aggressively to raise cash.
Silver tends to behave more like copper than gold during the onset of a financial crisis, creating a sell-off just when the thesis requires stability.
Other risks to watch out for
Retaliatory Chinese export controls could strangle solar demand just as high prices finally incentivise dormant silver to be recycled. Mexican mining regulation risks loom as the largest miners start consolidating. All this sudden looseness in physical availability would refill global inventories thus invalidating our structural deficit thesis.
Companies to watch
(our list of 15 companies bound to benefit from the silver squeeze)
Fresnillo (LSE: FRES) - Largest & oldest silver player
Fresnillo operates as the world's largest primary silver producer, with 2025 production of approximately 56 Moz across Mexican assets including the flagship Juanicipio joint venture. Market cap of $27 billion reflects tier-1 status, while $2.04/oz AISC at Juanicipio provides exceptional margin expansion as prices rise. The company's 1887 heritage in Mexico's premier silver belt offers geological optionality unavailable to peers.
Pan American Silver (NYSE: PAAS) - Largest silver-exposed diversified pick
Pan American commands the largest silver reserve base among primary producers at 468 Moz proven and probable, with 2025 production of 21-23 Moz. The September 2025 MAG Silver acquisition added 44% of Juanicipio plus 58 Moz reserves, positioning the company as the Americas' dominant diversified silver miner with an $18 billion market cap.
Hecla Mining (NYSE: HL) - North America silver mining pure play
produces approximately 37% of all U.S. silver and 29% of Canadian silver through Greens Creek (Alaska), Lucky Friday (Idaho), and Keno Hill (Yukon). The company's 240 Moz reserve base, second-highest in company history, demonstrates exploration success, while 2024 record sales of $929.9 million validate operational execution. Market cap of $10.6 billion reflects scale among U.S. producers.
Smaller companies to invest in
To dig further into smaller companies bound to benefit from the silver squeeze, create your own StockScreener like we did:
Bonus: ETFScreener
To find out more about ETFs available to index the silver squeeze, make your own ETF Screener like we did:
Our take
Silver's supply-demand fundamentals have rarely looked more favourable for sustained price appreciation.
Five consecutive deficits totalling 820 million ounces have depleted identifiable inventories to multi-year lows.
London vault holdings sit 50% below COVID-era peaks. Shanghai stockpiles have collapsed 86% to decade lows.
Industrial demand from solar, EVs, and AI infrastructure represents structural growth that will not reverse with economic cycles.
And policy catalysts, including U.S. critical minerals designation and Chinese export controls taking effect in January, are adding scarcity premium in real-time.
The question on everyone’s mind is: how long will this re-valuation run?
What gives us food for thought is silver's volatility profile.
Its 1.5-2.5x beta to gold means corrections are amplified. The 2011 crash from $49 to $15 remains seared into precious metals investors' memories.
The primary miners (Fresnillo, Pan American, Hecla) offer maximum leverage but also maximum volatility. Streaming companies like Wheaton Precious Metals also provide exposure with reduced operating risk.
At current levels near $75/oz with all-time highs being set weekly, momentum remains with the bulls. Fundamentals support it. But silver has broken hearts and wallets before.
Stay invested, cautiously.
