Silver Price Surges Past ₹2 Lakh on MCX

Silver prices experienced a notable surge on the Multi Commodity Exchange (MCX) on Friday, exceeding the ₹2 lakh per kg mark after a brief dip earlier in the day. Market analysts suggest that this upward trend could continue, fueled by positive global market signals, consistent demand from industries, and the weakening of the rupee.

**Gold/Silver Ratio Shift**

Axis Securities points to the decreasing Gold/Silver Ratio as a significant indicator of changes in the silver market. The ratio, once a tool for gauging investor risk appetite concerning metals, has significantly decreased from a high of nearly 105 to below 70 in 2025.

According to Axis Securities, this decrease demonstrates silver's outperformance relative to gold. Unlike previous instances where silver's price increased as a result of gold's performance, the current surge seems to be driven by the fundamentals of silver itself. The market is starting to view silver as a crucial industrial component, not just a hedge against monetary risks. This means that both industrial users and investors are competing for the metal.

**Supply Constraints**

Silver's supply is facing ongoing limitations. Despite price increases, production has remained relatively stable at about 810 million ounces annually for the last five years.

The reason for this is that silver production is often a byproduct of mining for lead, zinc, and copper, accounting for 70% to 80% of silver output. Consequently, the supply of silver is not very responsive to price changes because miners cannot increase silver production without significantly affecting the base metal markets. Scrap supply has not compensated for this gap, with secondary supply remaining limited, keeping total available supply under one billion ounces. The Silver Institute projects that mined silver supply will remain relatively constant at around 813 million ounces in 2025, with recycling efforts not significantly bridging the deficit.

Bhavik Patel, Senior Analyst at Tradebulls Securities, anticipates that the deficit will grow in 2026 because high silver prices have reduced the flow of silver recycling.

**Rising Industrial Demand**

Demand for silver continues to grow. Aamir Makda, a commodity analyst at Choice Broking, notes that the market is supported by a persistent supply deficit, primarily due to unprecedented industrial demand from the solar energy and electric vehicle (EV) sectors.

The demand from the solar photovoltaic sector has more than doubled in the last four years, increasing from 94.4 million ounces in 2020 to 243.7 million ounces in 2024. Solar energy alone accounted for approximately 21% of total silver demand last year.

Bhavik Patel observed that in 2025, the market recognized silver's growing importance in industries like solar energy, electrification, and data center infrastructure, making demand relatively insensitive to price changes in the short term. The development of artificial intelligence (AI) infrastructure is also a major driver of demand. Tech companies are projected to spend $700 billion in capital expenditure as they develop AI infrastructure, which heavily relies on silver.

**Low Inventory Levels**

Adding to the supply-demand imbalance is a growing shortage of inventory. Concerns about potential US import tariffs have led to a redistribution of physical metal worldwide, drawing silver towards US markets.

COMEX futures have consistently traded at higher prices than London spot prices, encouraging arbitrage activities that have depleted inventories from London, a key global liquidity hub, and moved them to US vaults.

Patel pointed out that silver inventories across exchanges are becoming scarce. Shortages of physical silver were already observed in the London Metal Exchange (LME) around September. Currently, silver inventory on the Shanghai Global Exchange is at a decade low, indicating that silver is being transferred across exchanges to address shortfalls.

**Positive Outlook**

Axis Securities suggests that silver has definitively broken out of a decade-long bottoming pattern. Maintaining a monthly closing price above $67 could pave the way for a multi-year uptrend towards $76 to $80. Makda added that investment inflows into silver ETFs and futures, along with technical breakouts that trigger further buying, could accelerate the rally.

While a period of stabilization near $65 is possible, the overall outlook remains positive as long as the $50 level is maintained. Axis Securities anticipates that any correction towards ₹1,70,000 to ₹1,78,000 in the domestic market will present an opportunity for gradual accumulation, with a target of approximately ₹2,40,000 by 2026.

Patel stated that silver is outperforming gold due to structural supply deficits and increasing demand from renewable energy and industrial sectors. Makda added that the current momentum is likely to continue, leading to further outperformance and a projected rally in silver during 2026.

*Disclaimer: Investment views expressed are those of the experts and do not constitute financial advice. Consult with a certified expert before making investment decisions.*