The silver market is forecast to record a fifth consecutive market deficit by 2025, with demand once again outstripping supply and most above-ground silver stocks unavailable to meet demand, at any price.

According to the Silver Institute's analysis, silver price movement does not correlate with changes in above-ground stocks.

"Silver, which in the past was only a store of wealth, for example in bullion, silverware, jewelry and coins, items that for the most part remain as produced and largely unavailable on the market, has become an industrial metal that is generally consumed or withdrawn from circulation, except for recycling, the effect of which can vary."

This is bad news given the growing demand for silver, especially for industrial use. 

Movements in bullion stocks have an impact on the price of silver and vice versa, but according to the Silver Institute, the vast majority of above-ground silver stocks are "immobile." There are only small net additions to or subtractions from these stocks annually. 

Some other notes from the Silver Institute report:

- Increases in bullion holdings are often positively correlated with price, as investment demand grows when silver prices rise, which further stimulates higher prices.

- In silver bear markets, declines in bullion stock prices have been occurring for several years and have exacerbated these declines. However, these declines have set the stage for silver to experience more substantial rallies as investors have rebuilt their bullion holdings.

- Stocks of above-ground manufactured goods are less price sensitive than those of bullion. Only specific subsets of demand for manufactured silver products show price sensitivity, such as jewelry and silverware.

Ultimately, the growing demand for silver will have to be met primarily from mine production, but silver production has stagnated in recent years and the future trajectory is uncertain.

Silver mine production peaked in 2016 at 900 million ounces. Until last year, silver production had fallen an average of 1.4 percent each year. In 2023, the mines produced 814 million ounces of silver.

According to preliminary data, silver mine production increased by approximately 2 percent in 2024, breaking a trend of declining silver production; however, this is not enough to meet demand. 

According to Metals Focus, a combination of reserve depletion, mine closures and a 20 percent drop in ore grades led to a drop in mine production.

This is why we have seen market deficits for several years in a row. 

Silver supply is expected to grow by 3 percent this year, but it will not be enough to meet growing demand. This will lead to a market deficit of 149 million ounces. While the gap between supply and demand will narrow by about 19 percent from last year's level, it will remain "historically sizable."

This is yet another reason to think that silver is destined to shine. 

Mike Maharrey, Money Metals