Deutsche Bank says the silver market's acute shortage has given way to a building surplus that could take hold as early as next year, with the bank's metals research head Daniel Ghali projecting spot prices averaging $70 an ounce by the second quarter of 2027, below where they traded in the first half of 2026. The call marks a sharp turn from the physical squeeze that dominated the market just months ago, when tight supplies in London sent borrowing costs to extremes and briefly pushed the metal above $120 an ounce.
Inventories tell the story
At the end of August, more than 914 million ounces sat in London's commercial vaults, with over 300 million ounces freely available for purchase. That freely available portion has grown 70 percent since October 2025. Stockpiles have also risen at CME warehouses and in Shanghai, a pattern Ghali says reflects more than a geographic reshuffle. He points to recycling, private vault releases, and softer demand as the drivers. Combined London and CME inventories, in his view, should put any remaining scarcity concerns to rest.
Solar thrifting drives demand destruction
Solar manufacturing looks set to be the primary source of demand erosion. Deutsche estimates global silver use in solar applications will fall more than 20 percent this year, with Chinese consumption dropping 33 percent. Per-cell usage is on track to decline 17 percent in 2026 as producers adopt thinner electrical contacts, copper-coated pastes, and designs that simply need less metal. The motive is clear: silver accounted for over 30 percent of module manufacturing costs earlier this year, up from under 10 percent at the start of 2025. That share has since retreated to about 14 percent, but the cost pressure remains enough to keep the thrifting going.
Investment flows now the swing factor
With scarcity fading, investment demand becomes the more important price driver. Deutsche's model suggests silver-backed funds could shed roughly 40 million ounces by December 2027 if the pattern from previous Federal Reserve tightening cycles repeats. India's imports have been running 25 percent below year-ago levels after higher duties and restrictions bit, though August data hint at a recovery. Even so, the combined London and Shanghai inventory cushion looks sufficient to absorb seasonal pickup.
The reversal is complete
The metal was changing hands at $60.99 on Monday afternoon, down about 14 percent since January but still 26 percent above a year ago. Ghali's assessment is blunt: peak scarcity is in the rear-view mirror. Whether the surplus materializes on schedule depends on whether industrial thrifting outpaces any safe-haven bid.