Deutsche Bank projects that the silver market could transition from a multi-year supply deficit into surplus as early as 2027, driven by declining photovoltaic demand, accelerating metal thrifting and rebuilding inventories across major trading centers. The bank expects spot silver to average approximately $70 per ounce during the second quarter of 2027, according to analysis by Daniel Ghali, Deutsche Bank's head of metals research. The shift represents a significant reversal from the scarcity narrative that dominated silver markets through 2025 and early 2026.
The Silver Institute currently forecasts a 46.3 million-ounce deficit for 2026, but Deutsche Bank argues that current structural trends could complete the transition to surplus by the following year. The primary driver of this outlook is substantially weaker industrial demand, particularly from solar manufacturers. Deutsche Bank estimates that global silver consumption in photovoltaic applications could decline by more than 20 percent during 2026.
Demand from China's solar manufacturing sector could fall by approximately one-third. Solar manufacturers are responding to high silver prices by accelerating material-saving technologies, including thinner conductive contacts, lower silver paste loadings, silver-coated copper pastes and copper electroplating. Deutsche Bank estimates that the quantity of silver used per solar cell will fall by approximately 17 percent in 2026.
The Silver Institute has independently identified the same trend, noting that silver loadings per unit fell by more than 15 percent in 2025 as silver-coated copper and other substitution technologies gained market share. Silver's price surge made the metal expensive enough that manufacturers accelerated efforts to use less of it. Earlier in 2026, silver represented more than 30 percent of solar-cell manufacturing costs in some applications, compared with less than 10 percent at the beginning of 2025.
Physical inventory availability has improved substantially across multiple jurisdictions. London Bullion Market Association data show that London vaults held approximately 914 million troy ounces of silver at the end of August 2026, an increase of 0.77 percent from July. Deutsche Bank estimates that more than 300 million ounces of the London total is currently freely available for purchase.
Freely available London inventory has increased roughly 70 percent since October 2025 and reached its highest level since late 2024. The improvement extends beyond London. Deutsche Bank points to increasing inventories at COMEX warehouses in the United States and trading venues in Shanghai as evidence that last year's acute physical shortage has eased.
Publicly reported COMEX silver stocks were around 338 million ounces in early October. When combined with London's approximately 914 million ounces, visible metal across the two major Western vault systems exceeds 1.25 billion ounces. Silver's physical market experienced extraordinary volatility in early 2026.
The metal traded near $30 per ounce at the beginning of 2025 before rallying sharply through the year and into early 2026. Spot silver reached an all-time high of approximately $121.64 per ounce on January 29, 2026. The rally then reversed dramatically, with prices trading into the mid-$50s during the June-July correction before recovering toward the low-$60 range.
Silver was trading around $61 per ounce in early October. The deficit has narrowed considerably since 2022. The physical silver market deficit reached approximately 237 million ounces in 2022, one of the largest annual shortfalls on record.
By 2025, the deficit had narrowed to approximately 40.3 million ounces, according to the World Silver Survey 2026 produced by Metals Focus for the Silver Institute. Supply fundamentals also support the outlook. The Silver Institute expects total global silver supply to remain around decade highs in 2026, with mine production projected near 820 million ounces, supported by additional output from operations in Mexico, China, Canada and other producing countries.
Recycling has become increasingly important as elevated silver prices encourage the return of jewelry, silverware and industrial scrap. Deutsche Bank identifies recycling and metal returning from private holdings as additional contributors to improving physical availability. Industrial demand is no longer growing at earlier rates.
Beyond solar applications, consumer electronics have faced cyclical pressure while high metal prices have encouraged manufacturers across several industries to reduce material use where technically possible. The Silver Institute forecast total industrial fabrication demand to decline in 2026 after years of exceptionally strong growth. Deutsche Bank's surplus forecast does not translate directly into a bearish price outlook.
The bank expects silver to average approximately $70 per ounce during the second quarter of 2027, above current levels near $60 to $61. Silver's dual role as both an industrial commodity and precious metal investment asset means that price depends on mine supply and fabrication demand but also on gold prices, interest rates, currency movements, investment flows and geopolitical risk. A better-stocked physical market could reduce the probability of another violent scarcity-driven spike without forcing prices materially lower.
If the silver market moves from chronic physical tightness toward balance or surplus, the metal could struggle to match gold's performance even in a favorable precious-metals environment. This could put upward pressure on the gold-to-silver ratio, which fell sharply during silver's early-2026 surge. Deutsche Bank also expects volatility to become more constrained than during the extreme moves recorded around the January peak.
The biggest uncertainty in Deutsche Bank's outlook remains China. China dominates global solar manufacturing and therefore has an outsized influence on silver's photovoltaic demand. A roughly one-third drop in Chinese solar silver usage would materially change the industrial balance.
However, stronger-than-expected installations, slower adoption of copper substitution or renewed manufacturing growth could preserve more silver consumption than Deutsche currently assumes. Chinese silver prices have also traded at premiums to Western markets at various points, suggesting regional demand has not disappeared. Source: ScrapMonster, Deutsche Bank analysis, Silver Institute, Metals Focus World Silver Survey 2026
Source: scrapmonster.com