Silver Reclaims the ₹2 Lakh Milestone on MCX, Signalling a Shift in Market Dynamics
Silver prices on the Multi Commodity Exchange (MCX) crossed the psychologically crucial ₹2 lakh per kilogram mark, marking a fresh milestone for the white metal. After a brief dip in early trade, prices rebounded sharply, supported by firm global cues, sustained industrial demand and a weaker rupee. For investors, the move is more than just a price breakout—it reflects a deeper structural change underway in the silver market.
Market experts believe silver’s rally is no longer riding on gold’s coattails. Instead, it is being driven by a combination of supply constraints, surging industrial consumption and tightening global inventories, making the outlook structurally bullish over the medium to long term.
Gold-Silver Ratio Collapse Highlights Silver’s Relative Outperformance
One of the clearest indicators of silver’s changing role is the sharp compression in the gold-silver ratio. Historically, this ratio was used as a proxy to gauge relative value and investor risk appetite between the two precious metals. However, according to Axis Securities, the ratio has fallen dramatically from lifetime highs near 105 to below 70 in 2025.
This decline signals silver’s decisive outperformance. Unlike previous cycles where silver acted as a leveraged bet on gold prices, the current rally is being powered by its own fundamentals.
Axis Securities noted that markets are now pricing silver primarily as a critical industrial commodity rather than just a monetary hedge. As a result, silver demand is emerging from two competing fronts—industrial users and financial investors—intensifying pressure on already constrained supply.
Also Read : Why Ramesh Damani Says Gold Can’t Beat the Sensex in the Long Run
Supply Constraints Continue to Cap Silver Availability
On the supply side, silver faces a chronic and persistent bottleneck. Global silver production has remained largely stagnant at around 810 million ounces over the past five years, despite rising prices.
The core issue lies in silver’s by-product nature. Nearly 70–80 percent of global silver output comes as a by-product of lead, zinc and copper mining. This makes silver supply inherently price inelastic, as higher silver prices alone cannot trigger a significant increase in production without altering base metal mining economics.
Secondary supply has also disappointed. Scrap and recycling flows have not risen meaningfully, keeping total available supply below one billion ounces. The Silver Institute expects mined silver supply in 2025 to remain flat at around 813 million ounces, with recycling unable to bridge the widening gap.
Bhavik Patel, Senior Analyst at Tradebulls Securities, expects the situation to tighten further. He noted that despite higher prices, recycling has failed to respond meaningfully, and the supply deficit could deepen further in 2026.
Industrial Demand Powers Silver’s Structural Bull Case
While supply remains capped, demand—particularly industrial demand—has surged to record levels. Analysts say this is the most important driver behind silver’s sustained rally.
Demand from the solar photovoltaic (PV) sector has more than doubled in four years, rising from 94.4 million ounces in 2020 to 243.7 million ounces in 2024. Solar energy alone accounted for nearly 21 percent of total silver demand last year.
Aamir Makda, Commodity Analyst at Choice Broking, said the persistent supply deficit is being underpinned by unprecedented industrial demand from renewable energy and electric vehicle (EV) sectors. Importantly, this demand is relatively price inelastic in the short term.
Patel added that 2025 marked a turning point, with markets waking up to silver’s indispensable role in solar energy, electrification and data centre infrastructure. He also highlighted artificial intelligence as a powerful new demand driver, noting that global tech companies are expected to spend nearly $700 billion in capital expenditure on AI infrastructure—much of which relies on silver-intensive hardware.
Low Inventories Add Another Layer of Support
Tight inventories are amplifying the supply-demand imbalance. Fears of potential US import tariffs have triggered a reshuffling of physical silver, drawing metal into US markets.
COMEX futures have consistently traded at premiums to London spot prices, encouraging arbitrage flows that have drained inventories from London—traditionally the world’s largest liquidity hub—into US vaults.
Patel pointed out that silver inventories across global exchanges are already stretched. Shortages were seen on the LME last year, while inventories on the Shanghai Global Exchange are now at decade lows, indicating that physical silver is being actively moved to plug regional supply gaps.
Silver Outlook: Bullish Structure Remains Intact
Axis Securities believes silver has decisively broken out of a decade-long bottoming pattern. A sustained monthly close above $67 could pave the way for a multi-year uptrend toward $76–$80 in global markets.
Investment inflows into silver ETFs, rising futures participation and technical breakouts are likely to accelerate momentum. While short-term consolidation near $65 is possible, analysts say the broader structure remains bullish as long as prices hold above the $50 level.
In the domestic market, Axis Securities views any correction toward ₹1.70–1.78 lakh as a staggered accumulation opportunity, with a longer-term target of around ₹2.40 lakh by 2026.
Summing up the trend, Patel said silver is quietly outperforming gold due to structural deficit conditions and rising industrial demand, while Makda expects the current momentum to persist well into 2026.
