SLV in Focus as Silver Enters a New Structural Phase

The silver market is undergoing a structural transformation, moving beyond traditional cyclical behaviour and into a new regime defined by persistent supply deficits, accelerating industrial demand, and sustained investment flows.

This shift has reshaped how investors and analysts assess silver-related instruments, including exchange-traded products such as the iShares Silver Trust (SLV), which provides exposure to the spot price of silver backed by physical metal held in secure vaults.

Understanding SLV

The iShares Silver Trust is designed to track the spot price of silver, net of operating expenses. It allows market participants to gain direct exposure to silver without the logistical challenges of physical ownership and is widely used for portfolio diversification, tactical positioning, and hedging purposes.

What changed in the silver market?

The most significant development occurred in the fourth quarter of 2025, when silver decisively broke above a decade-long resistance near $30. That breakout marked a transition into a new trading regime.

On January 20, 2026, silver reached a new all-time high at $95.34 per ounce, while SLV recorded an intraday peak near $81.5. The move above $50 was widely described by market participants as a “generational breakout”, rendering traditional technical targets less relevant.

Importantly, silver has begun to outperform gold in percentage terms — a classic feature of strong bull phases in precious metals.

Structural supply deficit

The silver market has now entered its fifth consecutive year of structural deficit. In 2025, demand exceeded supply by an estimated 117–150 million ounces.

Global mine production has declined roughly 7% from its 2016 peak to around 835 million ounces annually. At the same time, the development cycle for new mining projects typically spans 7–10 years, limiting the market’s ability to respond quickly to higher prices.

Above-ground inventories have also been steadily depleted. Registered silver stocks on COMEX have fallen by roughly 70% since 2020, while London vault inventories declined by around 40% during 2022–2023. This erosion of inventories removes traditional price buffers and forces industrial users to compete directly for limited supply.

Accelerating industrial demand

Industrial consumption reached a record 680.5 million ounces in 2024, accounting for approximately 57% of total silver demand.

Solar photovoltaics alone consumed an estimated 230 million ounces in 2024, a year-over-year increase of roughly 25%. By 2030, PV-related demand could exceed 300 million ounces annually. Each solar panel requires between 15 and 25 grams of silver, while next-generation TOPCon panels use approximately 50% more silver than conventional designs.

Electric vehicles contain two to three times more silver than internal combustion vehicles, while AI data centres, advanced electronics, and 5G infrastructure continue to create additional demand channels.

The European Union’s target of installing 700 GW of solar capacity by 2030 implies annual silver demand of roughly 250 million ounces from solar alone.

Investment flows and momentum

Silver-backed exchange-traded products absorbed approximately 95 million ounces during the first half of 2025, lifting total ETF-held silver to around 1.13 billion ounces — just 7% below historical highs.

Silver prices rose by roughly 147% in 2025 and nearly 190% year-over-year, suggesting a fundamental repricing rather than purely speculative excess. Some aggressive long-term scenarios discussed by analysts envision prices well above current levels if supply constraints persist.

Options as a case study in expressing market views

In environments characterised by strong momentum and elevated volatility, derivatives are sometimes analysed as tools for expressing directional views with defined risk. One commonly discussed approach is the use of call options on silver-linked instruments such as SLV.

For example, a long-dated call option with a higher strike price can be examined as a hypothetical structure that benefits from continued upside while limiting downside risk to the option premium paid. Such structures are highly sensitive to timing, volatility dynamics, and price behaviour of the underlying asset.

Key risks to consider

• Time decay: Options lose value as expiration approaches if the underlying price does not move favourably.
• Volatility compression: A period of consolidation could reduce implied volatility, negatively impacting option premiums.
• Tracking differences: While SLV closely follows silver prices, short-term divergences can occur during periods of extreme market stress.

Silver’s current cycle differs meaningfully from previous rallies. Structural supply constraints, accelerating industrial demand, and persistent investment flows have combined to create a fundamentally tighter market.

Whether prices extend further or consolidate in the near term, the underlying transformation suggests that silver is no longer behaving as a purely cyclical metal — but as a strategically constrained resource in an increasingly electrified and digital global economy.

This material is for informational and educational purposes only and does not constitute investment advice or a recommendation to buy or sell any financial instrument.