Silver has seen a strong rally in 2025 – and according to Sprott manager Maria Smirnova, this development is primarily the result of a supply and demand imbalance that has been building for years. Speaking to industry service Kitco News, the Chief Investment Officer of Sprott Asset Management emphasized that the current price movements are less a short-term phenomenon and more the consequence of a persistent deficit in the physical silver market.
Silver Market in Persistent Deficit – Declining Mine Production, Rising Demand
For Smirnova, the decisive turning point of the current movement lies in early summer: “The important moment was in June, when silver surpassed the $35 mark,” she says. From her perspective, this is underpinned by several years of structural scarcity.
For about seven years, the silver market has been in a fundamental supply deficit. According to her, mine production has decreased by approximately 80 million ounces over the past ten years. The total annual supply currently stands at around one billion ounces – a comparatively small volume for a global commodity market. “If production declines for years, it shows that we are not finding and commissioning new large silver mines,” says Smirnova.
In parallel, demand has significantly increased. The main drivers are industrial applications:
- Electronics and Semiconductors
- Solar industry – Photovoltaic systems are considered particularly silver-intensive
- E-Mobility
- Data centers and AI infrastructure, which require ever more power and data lines
From the Sprott manager’s perspective, the ongoing electrification and digitalization are creating a steadily growing demand for silver that the supply side cannot keep up with. The deficit has built up over years – and is now increasingly reflected in price developments.
Physical Bottlenecks: From London to New York – and on to China
For a long time, the structural deficit was countered by arguments that above-ground stockpiles were high. However, according to Smirnova, a trend reversal is also emerging here. She points to inventories at major trading hubs such as the London Bullion Market Association (LBMA), COMEX in New York, and the exchanges in Shanghai.
In recent years, these stockpiles have gradually decreased. In 2025, another shift occurred: Significant amounts of silver were moved from London to New York due to fears of potential tariffs. Simultaneously, rising holdings in silver-backed ETFs further drew metal out of the London market. The result: a noticeable bottleneck in the British hub of precious metal trading.
Meanwhile, the focus of tension has shifted. Smirnova points to dwindling inventories in China – particularly relevant from her perspective because a large portion of industrial consumption takes place there. “Solar is particularly important in my view, because that’s where the panels are produced,” she says. The solar industry consumes over 200 million ounces of silver annually, accounting for about 20% of the supply. If inventories in China dwindle, it directly impacts the place where the metal is needed in large quantities.
Silver as a Monetary Metal – and a Small Market with Significant Leverage
In addition to its role as an industrial metal, Smirnova still views silver as half a monetary metal – functioning similarly to gold. Accordingly, the price reacts sensitively to macro factors such as interest rate developments, currency movements, and investor risk appetite.
With the expectation of further interest rate cuts by the US Federal Reserve, discussions about renewed quantitative easing (QE) programs, and a weaker US dollar, gold and silver have recently received tailwinds. At the same time, the decline in cryptocurrencies has redirected attention more strongly towards classic monetary assets. “There is a growing recognition that gold and silver are the monetary metals and real store of value,” says Smirnova.
Added to this is the small market size: With an annual supply of around one billion ounces and current record prices, the value of annual production amounts to only about 60 billion US dollars. “That’s nothing. It doesn’t take much capital to move the price of silver,” she says.
From her perspective, the ETF sector makes a significant contribution. From January to date, more than 100 million ounces have flowed into Western silver ETFs – a significant proportion relative to global production. For comparison: A large silver mine typically produces 10 to 20 million ounces per year, according to her. The supply decline of 80 million ounces over the past ten years roughly corresponds to the closure or depletion of several large mines.
Producers Under Pressure: Few New Silver Mines, Focus on Gold
While demand for silver in industrial and investment sectors is increasing, the supply side has structurally changed. In years with lower silver prices around $20 per ounce, it was more difficult for many producers to operate profitably. Numerous companies therefore shifted their focus to gold – through acquisitions of gold mines or exploration in gold-focused projects.
As a result, some formerly pure silver producers have become gold-silver companies. Few new large silver mines have been commissioned. This year, therefore, an increasing activity in acquisitions has been observed, according to Smirnova: Three to four M&A transactions have focused on the acquisition of silver deposits and mines. However, the supply of high-quality projects is limited.
The return to a more silver-oriented project pipeline will take time. Smirnova points to typical lead times of five to ten years for the permitting, financing, and construction of new mines. In the short term, the supply side will therefore have little room to react to high prices.
Outlook: Silver Price Depends on China Imports and Investor Behavior
From Sprott’s perspective, the central question for the further development of the silver market is whether China can import sufficient silver to meet industrial demand. Crucial is who currently acts as the “marginal seller”: London, COMEX inventories in New York, or possibly Swiss vaults, should investors use higher prices to realize profits.
Despite already reaching all-time highs, Sprott remains positive on silver in the medium term. Smirnova cites the assessments of external market strategists: Paul Wong, a market strategist at Sprott, sees initial technical price targets in the range of $60 to $63 per ounce. Another analyst, Michael Oliver, even expects significantly higher ranges in the triple-digit area in the coming quarters.
Smirnova emphasizes that these are not her own forecasts, but external scenarios. Nevertheless, they make it clear that many market participants interpret the current price development as the result of a long-term adjustment process to a structural deficit.
