Many investors will not forget last Friday anytime soon, especially those who are invested in precious metals or were on that day. Not only was the gold price sent on a rapid downward spiral, but the white precious metals also suffered heavy losses, and silver, in particular, came under considerable pressure with a minus of over 30 percent at its peak.
Such a high daily loss inevitably calls out all those voices that assume a bubble is bursting, and indeed, the sharp price movement has led to many weak hands being knocked out of the market. Speculative overhangs have been reduced, which is more likely to be positive for the further course of the rally, if there is to be one.
The chances of this are not bad, because the sharp sell-off has not changed anything essential in the underlying problem despite all its drama. In the background, there is a structural deficit. This exists at high prices as well as at low prices. Its basis is that the silver market has now been in a deficit for the fifth year in a row.
Problems on the supply side determine the picture
Silver consumption is around 200 million ounces lower than supply, and this has been the case for the fifth year in a row. 2026 has a good chance of going down in history as the sixth year in this series, because silver production from the mines is very unlikely to increase. The opposite is more likely to be feared. Fresnillo, one of the world’s largest silver producers, has already announced in its outlook for 2026 that the company expects lower silver production compared to the previous year. Problems on the supply side determine the picture
Whether other producers will be able to compensate for this slump will be one of the most exciting questions for the coming eleven months. Against this background, it can only be expected that the silver market will not have another deficit in 2026 if silver demand declines significantly. However, this does not currently seem to be the case.
Rather, it is to be expected that the demand for silver will remain high or even increase, because in addition to the needs of industry, investors who demand physical silver in larger quantities for investment purposes could now also push into the market on a larger scale. They may be inclined to buy silver now, especially due to the massive price slump on January 30, because a 30 percent discount is always a strong selling point in other industries and for other products.
Two different consequences of the silver crash have the same effect in the medium term
While the sell-off on January 30 is likely to have a rather invigorating effect on buyers and their silver demand, exactly the opposite development is to be expected on the producers’ side. The reason is as follows: In mining, thinking is traditionally done in very long periods, because the individual development steps are as time-consuming as they are expensive. Within the mining companies, one longs above all for a basic prerequisite – planning security.
If this planning security is given, the industry is ready to develop projects. If planning is conservative, moderate price fluctuations can be easily taken into account. However, it becomes difficult if the prices for the extracted products are subject to strong fluctuations. These not only cause problems for investors. Many a mine manager will also have asked himself on January 30 and in the days that followed what this massive slump means for his further planning.
Psychologically, the crash has a devastating effect at this point, because it paralyzes and suggests an even more cautious behavior for the future, while a continuous moderate increase psychologically has a rather opposite consequence, because it favors a positive view of the future and a correspondingly optimistic basic attitude. It would not be surprising if within the industry in the coming weeks and months, many a development project is now put to the test again with particular scrutiny. The mere delay that this entails increases the deficit because production begins later. If a project is even stopped completely, the consequences are even more serious.
