Silver Prices Hold Firm Amid Persistent Supply Constraints

Silver consolidates at high levels, supported by geopolitical risks, new trade disputes, and a tight physical market with a projected sixth annual deficit in 2026.

Silver is trading at elevated levels, consolidating after a four-day rally. The precious metal is currently priced near $88 per troy ounce, supported by a confluence of geopolitical tensions, fresh trade disputes, and a fundamentally tight physical market. While a period of consolidation is underway, the drivers fueling its safe-haven appeal remain firmly in place.

Geopolitical and Trade Tensions Fuel Demand

Geopolitical risk continues to provide a key pillar of support. Recent comments from the Trump administration hinting at potential limited military strikes against Iran have sustained a risk premium across markets. However, confirmation from Oman of another round of negotiations scheduled for this week in Geneva has offered a slight moderating influence on escalation fears.

Simultaneously, trade policy uncertainty is resurgent. A recent U.S. Supreme Court ruling declared tariffs imposed under IEEPA unconstitutional. In swift response, the Trump administration has proposed a new 15% global tariff under Section 122. Furthermore, reports from the Wall Street Journal indicate potential national security tariffs (Section 232) targeting six industrial sectors are under consideration. This instability extends internationally, with the EU signaling a possible suspension of its trade deal ratification with the U.S., and India and the U.S. postponing a meeting to finalize an interim trade agreement. This landscape of heightened uncertainty traditionally boosts demand for precious metals as a hedge.

Structural Deficit and Production Risks Underpin the Market

The supply side of the equation presents its own set of challenges, reinforcing the bullish narrative. Mexico, the world's largest silver producer contributing approximately one-quarter of global mine output at around 202.5 million ounces, faces renewed instability. Retaliatory violence in several states following the killing of cartel leader "El Mencho" on Sunday raises concerns over supply disruptions in key mining regions, exacerbating risks in an already tight market.

This aligns with a longer-term structural deficit. Analysis from the Silver Institute and Metals Focus projects the silver market will record its sixth consecutive annual shortfall in 2026, with an expected deficit of 67 million ounces. While total supply is forecast to rise 1.5% to 1.05 billion ounces (comprising an estimated 1% increase in mine production to 820 million ounces and a 7% rise in recycling to over 200 million ounces), physical investment demand is anticipated to surge by 20% to 227 million ounces.

A tangible indicator of this tightness is the level of registered COMEX inventories—silver available for immediate delivery. According to Disruption Banking, these stocks have dwindled to approximately 82-88 million ounces, a figure roughly 75% below the 2020 peak of around 346 million ounces.

The Gold Ratio, Rates, and Volatility Define the Trading Range

Silver's relative outperformance is visible in the gold-silver ratio, which stood at 58.74 today, slightly down from 58.90. The Silver Institute notes the ratio briefly fell below 50 in January, a level not seen since 2012. This compression highlights silver's dual appeal as both an industrial and monetary metal.

However, the interest rate environment acts as a counterbalance. Analysis from Seeking Alpha suggests that stable or rising yields could cap significant price advances, while declining yields would offer the metal more room to appreciate. This creates a central tension for traders: can the forces of risk premiums and supply scarcity overpower the headwind of resilient U.S. Treasury yields?

The market's inherent volatility is also a key characteristic. J.P. Morgan notes that following the nomination of Kevin Warsh as the future Fed Chair, silver experienced a single-day plunge of 27%. Earlier in February, the price fell another 12% below $75, according to InvestmentNews. From those lows, silver has recovered to current levels around $88, though it remains well below the January record high of approximately $121 per ounce. For 2026, J.P. Morgan's average price forecast stands at $81 per ounce.