The silver price recently experienced a pullback towards $38 per ounce, but according to analysts, the precious metal, especially after seven years of supply deficit, still remains in a solid uptrend.
Sprott Asset Management, for instance, believes that the silver price will rise significantly in the second half of 2025. According to the experts, demand will remain “solid” while supply is significantly reduced. The precious metal, which is used in the production of solar cells, among other things, due to its outstanding conductivity, has already seen significant gains in recent months.
While the gold price has risen by around 27% since the beginning of the year, silver has seen an even higher increase of almost 29%. Sprott Asset Management identifies the triggers for the silver price rally as a structural supply deficit, rising industrial demand, and a resurgence in investment demand, particularly among Asian and North American retail investors who acquire exchange-traded products, as well as coins and bars.
Industrial Demand: Crucial Factor for Growing Silver Deficit
According to analysts, industrial demand is a decisive factor for the increase in the silver market deficit. And Sprott does not believe this trend will change anytime soon. Since 2016, total global silver demand has risen by 16%, while mine production has decreased by 7%.
In such an environment, the short-term potential of the silver price could depend on retail investor demand, which, however, remains difficult to assess. Since the supply of freely tradable silver has significantly decreased, even a small increase in demand could now lead to a significant price increase. Investor positioning has therefore become more important.
Silver versus Gold Still Undervalued
As Sprott further explains, although silver has outperformed gold in recent months, the premium on gold price is still exaggerated. While the gold-to-silver ratio has significantly decreased from over 100 in April to around 86 now, the historical average is only 50 to 60, which, according to analysts, makes silver interesting for retail investors.
Regarding the further upside potential of the silver price, analysts at Sprott Asset Management point out that historically, in a precious metals bull market, the silver rally has on average been twice as strong as that of gold. This is primarily due to the smaller silver market and higher volatility, which would amplify price movements, but also to silver’s dual role as an industrial and monetary metal, which brings additional demand, according to the experts.
