The Silver Shock: When Industry, Not Investors, Broke the Market

SYNOPSIS

Silver delivered one of its strongest rallies in India in 2025, sharply outperforming gold. The surge was driven not by jewellery demand or speculation, but by a persistent global supply deficit, rigid mine production, and rapidly rising industrial demand from solar and electric vehicles. India’s green energy push and heavy import dependence have amplified the impact, while China’s control over refining and exports has added supply uncertainty. Together, these forces signal silver’s shift from a traditional precious metal to a strategic industrial asset for India

“Industry-driven demand sparked India’s silver market surge.”

Silver ended as one of the strongest performing assets of 2025. In India prices didn’t just rise, they gave most returns in history. MCX Silver futures crossed ₹2 lakh per kg marking a 150-156% Y-o-Y jump. Gold was up roughly 80%. Spot prices for Silver rose to nearly ₹2.41 lakh per kg.

This wasn’t driven by jewellery demand or short-term speculation. What really rose prices was structural: a persistent supply deficit, rapidly rising industrial demand and tighter control over physical Silver mainly due to China.

Global silver demand of around 1.25 billion ounces significantly exceeded supply of approximately 1.02 billion ounces, resulting in a fifth consecutive annual deficit of 117–230 million ounces. Mining output has remained largely stagnant at about 830–840 million ounces per year, reinforcing the persistent supply shortfall.

What’s important here is that supply of Silver doesn’t respond quickly to price signals. Nearly 70% of global silver output comes as a by product of lead, zinc and copper mining. Since Silver isn’t the main objective of these mines higher prices don’t provide higher output. Even primary silver mines take 10-20 years to do production.

Demand meanwhile has shifted toward industry. Today 55-59% of total silver consumption around 677-680 million ounces comes from industrial use. Solar and EV applications together consume over 320 million ounces annually, driven by electronics-heavy designs. Here higher prices don’t meaningfully reduce demand.

India’s green transition adds further demand. Country’s target of 500 GW of renewable energy capacity by 2030 directly increases silver consumption across solar panels, power infrastructure, electronics and electric vehicles. Unlike jewellery, this demand is price inelastic. With negligible domestic silver production India is dependent on global suppliers.

China refines an estimated 40-60% of the world’s newly mined Silver and exported over 148 million ounces during the first eleven months of 2025. From January 1 2026, China introduced export licensing for Silver. Around 121 million ounces annually will now require approval and only 44 companies have been licensed for exports during 2026-27. This isn’t a ban but it introduces delays, friction and uncertainty in a market that already operates on thin inventories.

At the same time global trading behaviour is changing. Chinese markets strongly favour physical silver accumulation, while the US and other Western markets rely heavily on paper contracts where outstanding claims exceed available physical metal. In several International markets physical Silver is trading at a premium to paper prices signalling a clear shift in trust away from contracts and toward actual metal.

China’s export licensing framework gives policymakers control over both timing and volumes. Even a small delay can ripple through global supply chains, especially in industries like Silver that operates with thin inventory buffers. Similar strategies were used earlier in rare earths, where prices surged well before any outright restrictions. In Silver, the impact is sharper because supply is Inelastic and substitution options are limited.

For India, the consequences are very harsh. India imported roughly 5,500-6,000 tonnes of Silver in 2025 with about 42% sourced from China. With high import duties, logistics costs, rupee fluctuations and domestic demand have resulted in silver trading at premium in compare to other global benchmarks.

In an international macro sense, the silver 2025-26 rally represents structural transformation and not a temporary phenomenon. One of the more intriguing developments: central banks and sovereign entities are increasingly eyeing silver as a reserve or strategic asset.

• Russia has reportedly allocated significant funds specifically for silver in its reserve buying program.

• Saudi Arabia’s central bank has entered the silver market, acquiring shares in silver ETFs like SLV.

• Analysts note that central bank buying of gold has long been standard; now, a pivot to silver may validate silver as an investment asset beyond retail markets.

If sovereigns adopt silver more broadly, that could mark a paradigm shift in how the metal is viewed.

Conclusion: The role of silver has changed firmly to being an ornament to infrastructure. Silver has turned out as a gauge of this shift in a world that is separating between a manufacturing-intensive East and a financial-based West. The 2025 comeback of silver is not accidental; there is a combination of multiple forces, including industrial use flourishing, a lack of sufficient supply response, and investor and sovereign interest.

PARTH AJMERA