Silver prices continue to consolidate below $50 an ounce; however, there are growing bullish expectations as the precious metal has been officially added to the U.S. Geological Survey (USGS) 2025 List of Critical Minerals.
Although silver is a precious metal and recognized as an important monetary asset, more than 60% of its demand comes from industrial applications. Growing industrial demand is the primary factor behind silver's ongoing and significant supply deficit. Analysts note that this new recognition could further complicate the silver market and its already fragile global supply chain.
Robust industrial demand has created substantial supply deficits in the silver market for the past five years, depleting above-ground stockpiles to critically low levels.
The silver market has also been fraught with volatility and uncertainty due to President Donald Trump’s global tariffs and trade war. New York vaults were flooded with silver at the start of the year as market participants and bullion banks built up stockpiles in case the metal was tariffed.
As stockpiles in the U.S. have grown, the available supply of physical metal in London has steadily declined, with unprecedented demand coming from Indian consumers. The dwindling supply in London vaults caused silver lease rates to rise to record highs above 34% last month. The market also saw unprecedented backwardation, with spot prices rising faster than futures prices.
Although silver has not been tariffed because of its precious metal status, much of the metal has remained in the U.S., as its growing importance as an industrial metal has made it a critical commodity that could face new tariff threats.
The USGS list will determine which commodities are included in President Trump’s Section 232 probe into processed critical minerals and derivative products, announced in mid-April. The president has made domestic production of these critical metals a national priority, which could also lead to trade restrictions.
In an interview with Kitco News, Matthew Piggott, Director of Gold and Silver at Metals Focus, said he expects this new designation to increase volatility in the silver market.
“There’s definitely going to be far more tightness in the silver market,” he said.
Piggott explained that the volatility in silver will only ease once the supply issues are resolved — a process he said will not be easy.
“It’ll only be rectified if we end up with surpluses in the silver market going forward. Certainly, for this year, we’re going to end up with another deficit. Looking into next year, we’ll see the same because we won’t have significant industrial weakness to reduce silver consumption,” he said. “I think how this balance turns around to a surplus will depend more on the price itself being a victim of its own success.”
Piggott added that higher silver prices are expected to drive more thrifting trends in the solar power sector. Silver consumption in photovoltaic solar panels has been a key price driver in recent years.
He noted that silver accounts for about 15% of solar panel costs, and as a result, manufacturers are trying to find ways to reduce that amount. Piggott said that every $10 rise in silver prices puts more pressure on manufacturers to cut their silver usage.
If prices continue to climb, manufacturers could eventually phase out silver completely and switch to copper; however, the technology for this large-scale substitution remains relatively new and untested.
“We could see elevated silver prices for the next 24 months, but it will all depend on the evolution of solar panel technology,” said Piggott.
Silver is one of 10 new metals added to the updated critical minerals list, alongside copper, metallurgical coal, potash, rhenium, silicon, and lead.
