While international silver prices have settled after an epic rollercoaster in early 2026, China’s domestic silver market remains under extraordinary pressure. Stockpiles in warehouses linked to the Shanghai Futures Exchange (SHFE) and the Shanghai Gold Exchange (SGE) have plummeted to levels not seen in over a decade, with inventories struggling to meet both the investment frenzy and robust industrial off-take.
Reflecting the intensity of the supply crunch, the front-month contract on SHFE recently reached a record premium over longer-dated contracts, a rare instance of “backwardation” in a typically contango-oriented futures market. This condition indicates a strong preference for immediate delivery, underscoring the urgency with which buyers are seeking the metal.
“Such a large backwardation is driven by an inventory crisis and the depletion of deliverable material,” explained Zhang Ting, senior analyst at Sichuan Tianfu Bank Co. “Institutions still have incentives to continue squeezing the market for profit.” The tight silver supply is being worsened by soaring investor interest. Shuibei market in Shenzhen, China’s largest bullion hub, has seen investment bars vanish almost as quickly as they hit the shelves. “Whenever there are stocks, they’re sold off quickly,” said Liu Shunmin, head of risk at Shenzhen Guoxing Precious Metals Co.
This surge follows silver’s dramatic rise in early 2026, when it briefly outshone gold as the preferred hedge for economic and geopolitical angst. The price soared to an all-time high of $85 per ounce, a rally attributed to a weaker U.S. dollar, macroeconomic uncertainty in the U.S., speculation about Federal Reserve independence, and global tensions.
Silver’s industrial demand, especially from China’s photovoltaic (PV) sector, further compounds the issue. Domestic solar manufacturers have been front-loading orders ahead of an April policy shift that removes export tax rebates. Many seized the opportunity of a short-lived dip in silver prices to stockpile inventory. Silver is critical to solar panel production, particularly for cell-to-cell conductivity, and accounts for a large share of global industrial use.
Nevertheless, some analysts note looming changes that could dampen silver’s long-term industrial demand. Gregory Shearer, head of Base and Precious Metals Strategy at J.P. Morgan, notes that high silver prices may incentivize the shift toward thrift and alternative, silver-free technologies such as cadmium telluride thin-film PV cells. “From a fundamental perspective, the surge higher in silver has likely already set in motion a meaningful acceleration in substitution and thrifting trends,” Shearer stated, noting this could present future headwinds for silver demand.
Geopolitical developments and unexpected shifts in U.S. monetary policy have also fueled silver price volatility. After months of speculation, President Trump’s administration refrained from imposing tariffs on critical minerals, including silver, preserving global supply flows but introducing volatility in financial markets.
Additional price pressure arose when Trump nominated Kevin Warsh as the next Federal Reserve chair, a move seen as signaling a tighter monetary stance. Silver, along with gold, tanked on the news as the U.S. dollar rallied sharply, reversing much of the earlier gains.
Short sellers on the SGE also reflected the supply crunch, paying deferral fees since December to avoid making deliveries in a market starved of physical metal. Open interest in SHFE futures has dropped to a four-year low ahead of the Lunar New Year, suggesting a cooling in speculative fervor at least temporarily.
The Silver Institute projects the global silver market will remain in deficit for a sixth consecutive year in 2026. Demand from coin and bar investors is forecast to rise 20%, reaching a three-year high of 227 million ounces. Meanwhile, total global industrial silver demand is expected to fall slightly by 2% to around 650 million ounces, the lowest in four years, due to increasing efficiency in PV technology and material substitution.
Nevertheless, other end-use sectors, such as artificial intelligence, data centers, and electric vehicles, are expected to sustain silver’s overall industrial relevance. Silver jewelry usage, however, is set to decline by more than 9% under the weight of record-high prices, with India experiencing the steepest pullback. On the supply side, global silver output is forecast to rise by only 1.5% in 2026, reaching a 10-year high of 1.05 billion ounces, but this is insufficient to offset rising demand. Given structural constraints, such as silver typically being mined as a byproduct of other metals, production remains relatively inelastic.
Analysts at J.P. Morgan Global Research forecast silver prices will average $81 per ounce in 2026, peaking around $85 in Q4. They predict that the scarcity of reliable central bank demand, which gold enjoys, leaves silver more vulnerable to speculative swings and investment sentiment. Still, as China and India continue to assert significant influence over metals pricing, silver could find strong regional support.“In the near term, amplified Chinese investment demand significantly influences price formation,” Shearer said. “Ultimately, we are more cautious on re-engaging in silver until it becomes clearer that some of the recent froth in prices has been fully shaken out.”
In conclusion, silver’s trajectory in 2026 and beyond remains a balancing act among industrial innovation, investor enthusiasm, geopolitical volatility, and global macroeconomic shifts. With demand outpacing supply and volatility returning to the market, silver remains a precious metal on a fine edge, impossible to ignore yet increasingly difficult to predict.