World Silver Institute: Silver "Six consecutive years of shortage"! This year's gap has expanded to 46 million ounces, risking a repeat of the short squeeze storm

Precious metals market is surging with undercurrents! According to the latest report jointly released by the Silver Institute and the authoritative organization Metals Focus, the global silver market is entering its sixth consecutive year of structural shortage. Since 2021, the market has consumed 762 million ounces of inventory. Although silver prices have retreated from the all-time high in January this year, analysts warn that as the supply shortage gap further widens this year, a new “liquidity squeeze” storm could be triggered again at any moment.
(Background: Manipulating Bitcoin to exchange for silver? After Jane Street became the largest ETF holder, silver plummeted 30% in one month)
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• Prices have fallen 35% from the historical high, but the shortage gap continues to widen
• Demand structure shifts: industrial demand weakens, physical investment surges 18%
• Metals Focus warns: liquidity squeeze risk is approaching

The supply anxiety in the global commodities market is rapidly spreading within the silver sector. Silver, widely used in jewelry, electronics, electric vehicles, solar panels, and investment hedging, is facing an imbalance of supply and demand that has become hard to ignore. According to Reuters’ latest report, the Silver Institute and consulting firm Metals Focus released a study on Wednesday (15th) indicating that the silver market is facing a sixth consecutive year of structural deficit.

Prices have fallen 35% from the historical high, but the shortage gap continues to widen

Reflecting on the market’s frantic performance, driven by strong demand for physical silver and inflows into exchange-traded products (ETPs) in the U.S., silver experienced a sharp surge of 147% in 2025, reaching a historic high of $121.6 in January 2026. Although the frenzy cooled among retail investors and prices have since retreated about 35%, the underlying supply and demand fundamentals remain tight.

Data from the report shows that since 2021, the market has extracted an astonishing 762M ounces of silver from inventories. Looking ahead to 2026, despite global total demand expected to decline slightly by 2%, global silver supply is also projected to contract by 2%. This will cause the global silver market’s shortage gap, which was 40.3 million ounces in 2025, to further expand to 46.3 million ounces.

Demand structure shifts: industrial demand weakens, physical investment surges 18%

Metals Focus detailed the changes in supply and demand structure for 2026:

• Industrial and jewelry demand decline: Due to the impact of the Iran war and the slowdown in global economic growth, industrial silver manufacturing is forecasted to fall 3%, hitting a four-year low, with further downside risks.
• Countertrend surge in investment hedging: In stark contrast to industrial weakness, driven by a revival of U.S. buying, physical investment demand for silver coins and bars is expected to increase significantly by 18%.

Metals Focus warns: liquidity squeeze risk is approaching

Ongoing inventory depletion makes the market highly susceptible to liquidity shortages. In October last year, the London benchmark market experienced a liquidity squeeze event triggered by a surge in physical demand.

Philip Newman, CEO of Metals Focus, pointed out that as of the end of March, about 28% of the 884 million ounces of silver held in London vaults are not tied to ETPs and can be used to support market liquidity (this ratio is higher than the 17% during the last squeeze in September). Therefore, recent liquidity conditions have indeed improved, and London’s leasing rates have roughly returned to normal.

However, Newman sternly warns that the market must not be complacent: “The risk of another liquidity squeeze this year still exists.” He emphasizes that if silver prices become more volatile, demand in the Indian market reactivates, and ETP funds stored in London flow back in, it will force further outflows from U.S. inventories, creating the perfect conditions for another “silver squeeze” storm.