Global silver market Report Interpretation

Overview

This Citi commodity-market report argues that silver’s near- to medium-term price direction will be led by investment demand rather than industrial demand. Its base case assumes eventual Strait of Hormuz de-escalation, lower oil-driven inflation pressure and a less hawkish Federal Reserve, while solar PV technology shifts create a more cautious longer-term outlook for solar-related silver consumption.

Core views

Citi keeps its silver point-price targets unchanged at $75/oz for 0–3 months and $90/oz for 6–12 months, compared with $65/oz spot. The central thesis is that silver should continue to follow gold with high beta as investment flows regain importance. Recent pressure came from higher real yields and a stronger US dollar after higher-for-longer oil prices raised expectations of Federal Reserve tightening. Citi’s base case is that the Strait of Hormuz situation eventually de-escalates, oil and inflation pressures normalize, and the Fed becomes less hawkish. The report says this shift could occur as soon as September–December, lowering real yields and supporting a rebound in silver investment demand. Investment positioning is an important part of the argument. Global ETF investors had shed 70moz year to date, lease rates had turned negative as physical tightness eased, and managed-money positioning remained relatively light. Citi nevertheless forecasts net ETF inflows of 10moz in 2026, which implies approximately 80moz of inflows in 2H26 after the year-to-date outflows. It also notes that ETF investors bought 5moz in July and that Indian silver ETF holdings increased by about US$450 million, or roughly 7moz, in June. In Citi’s view, a macro normalization could turn this subdued positioning into renewed investment demand. India is presented as a near-term source of physical support. Following mid-May import restrictions, India raised silver import duties to 15% and required advance import authorization. Domestic silver has traded at an approximately 7% premium to the global benchmark on a 30-day moving-average basis. Imports initially fell below 1moz and prices declined around 19%, versus a roughly 25% global decline; Citi attributes the gap to the local premium. It expects the market to remain underbid by approximately 5–7moz per month until conditions normalize. If restrictions are gradually unwound after de-escalation and lower oil prices, pent-up demand may be released. Citi expects demand to strengthen in 4Q26 with the festive and wedding season, although continuing FX-reserve pressure could keep premiums elevated. Until then, the Indian market is expected to rely heavily on Hindustan Zinc supply. Citi has materially reduced its industrial-demand outlook because of solar PV substitution and thrifting. It now forecasts total silver demand of about 1,100moz in 2026, down around 9% year on year, and forecasts solar demand at 234moz in 2026 and 198moz in 2027, versus 288moz in 2025. The resulting silver deficit is expected to narrow sharply to 64moz in 2026 from approximately 400moz in 2025. Supply is forecast to decline 0.3% year on year in 2026 before rising 3% in 2027, but Citi still expects consecutive annual deficits through 2027 because supply remains below demand. Non-solar industrial demand, including AI, 5G and EV applications, is expected to grow and provide resilience. The report identifies the solar industry’s move from TOPCon toward Back Contact technology as a structural medium-term headwind for silver. BC architectures eliminate front-side metallization, and LONGi’s ACM uses copper-based metallization that can reduce or eliminate silver use. Citi expects BC adoption to accelerate meaningfully in 2027 and potentially become a leading solar-cell technology by 2028. About 53GW of BC capacity is expected to come online in 2026, while approximately 33GW of TOPCon capacity is being converted to BC production. LONGi shipped about 23GW of BC modules in 2025, and AIKO has announced conversion of 6GW of TOPCon capacity at Chuzhou and 5GW of PERC capacity at Yiwu into ABC production. These conversions lower the capital intensity of the technology transition and could speed wider adoption. Citi does not expect BC adoption to be as seamless as the earlier TOPCon transition. Chinese solar manufacturers face persistent oversupply, weak module pricing, trade barriers and grid-absorption constraints, and major producers including Tongwei, LONGi and JA Solar remained loss-making in 1Q26, with losses expected to widen in 2Q26. A 20% year-to-date decline in solar-cell prices has also constrained capital allocation. These conditions may delay large-scale BC investment even as companies pursue R&D and conversion projects. TOPCon is expected to remain dominant through 2027, particularly in utility-scale installations, but Citi sees 2027–2028 as a potential broader inflection point for BC and therefore remains cautious on the longer-term solar-demand contribution to silver. Citi assigns a 60% indicative probability to its base case. In its 20% bull case, swift US-Iran de-escalation and faster oil-supply normalization bring inflation down, prompt Fed rate cuts and lift silver to $95/oz by 1Q27, supported by stronger investment and jewelry demand in India and China. In its 20% bear case, faster solar thrifting and substitution, a continuing Strait of Hormuz impasse, higher-for-longer oil prices and a hawkish Fed push silver to $50/oz by 4Q26.

Analysis framework

Citi combines a global silver supply-and-demand balance with scenario-based price forecasts. It links macro conditions, real yields, the US dollar and ETF flows to investment demand; examines Indian import restrictions and local premiums for physical demand; and assesses solar technology, capacity conversion and manufacturer profitability to estimate industrial-demand substitution and thrifting.

Methodology notes

• Industry AnalysisSupply-demand framework

  Global silver supply-and-demand balance

  Citi forecasts mine production, scrap, government sales and demand categories to estimate deficits through 2027 and assess the market balance underpinning prices.

• Industry AnalysisSubstitution-Effect Analysis

  Solar PV silver substitution and thrifting through Back Contact technology

  The report evaluates how copper-based metallization and BC cell adoption can reduce silver intensity and lower solar-related silver demand.

• Event-Driven and Behavioral FinanceEvent-driven analysis

  Strait of Hormuz de-escalation and Federal Reserve policy scenarios

  Citi sets base, bull and bear price paths based on how geopolitical normalization, oil prices, inflation and Fed expectations affect investment flows.

Key data

• Silver price target, 0–3 months$75/ozUnchanged; compared with $65/oz spot.
• Silver price target, 6–12 months$90/ozUnchanged base-case target.
• 2026 silver deficit forecast64mozExpected to narrow significantly from approximately 400moz in 2025.
• 2026 total silver demand forecast1,121mozTable forecast; narrative describes approximately 1,100moz, down around 9% year on year.
• Solar silver demand234moz in 2026; 198moz in 2027Down from 288moz in 2025 as thrifting and substitution increase.
• 2026 net ETF flows10mozImplies approximately 80moz of inflows in 2H26 after 70moz of year-to-date outflows.
• India domestic silver premiumApproximately 7%30-day moving average, ex-duty, following import restrictions.
• Bull and bear scenarios$95/oz by 1Q27; $50/oz by 4Q26Each scenario carries a 20% indicative probability.
• BC solar capacity coming onlineApproximately 53GW in 2026Includes capacity conversions supporting a potential acceleration in BC adoption.

Impact & implications

Citi expects investment flows and macro normalization to dominate silver pricing in the near term, supporting its unchanged targets even as the solar sector reduces silver intensity. India’s constrained imports and seasonal demand may support the physical market, while BC technology creates a more material medium- to long-term headwind for solar-related demand.

Risks

• Faster-than-expected solar PV thrifting and substitution could reduce silver demand more sharply than Citi’s base case.
• A continuing Strait of Hormuz impasse, higher-for-longer oil prices and a hawkish Federal Reserve could suppress investment demand.
• Weak solar-industry economics and constrained capital spending could alter the timing of BC technology adoption.
• Indian FX-reserve conditions and import restrictions could keep local premiums elevated and delay demand normalization.

What to watch

• Developments in the Strait of Hormuz situation, oil prices, inflation and Federal Reserve expectations.
• Silver ETF flows, managed-money positioning and lease rates.
• Indian import restrictions, import duties, domestic premiums and 4Q26 festive and wedding-season demand.
• The pace of TOPCon-to-BC and PERC-to-ABC capacity conversions, including BC investment by major Chinese solar manufacturers.
• Solar-cell pricing, manufacturer profitability and the pace of silver thrifting in PV production.