Silver outlook for 2026: Demand drivers, supply limits may support prices

After a bumper run in 2025, silver's long-term case remains intact, but experts warn investors to brace for volatility and moderate returns as global conditions evolve

Silver’s scorching rally shows no signs of cooling in 2025, with its price crossing the ₹2 lakh per kg mark in the domestic market. This precious metal has delivered a return of 123 per cent year-to-date.

 

“Lower global yields, rising recession fears, and renewed safe-haven demand boosted all precious metals. But silver outperformed because it is both a macro hedge and a high-growth industrial metal,” says Niranjan Avasthi, senior vice-president, Edelweiss Mutual Fund. 

After such a strong run, the key question for investors is whether silver can continue to reward them in 2026. 

Is silver’s demand–supply balance supportive? 

Experts believe the outlook remains favourable, underpinned by rising industrial usage and sustained investment demand. “The bull run can extend because silver sits at the centre of three unstoppable megatrends—solar photovoltaic growing at 15–20 per cent compound annual growth rate (CAGR), electric vehicles (EVs) at 10–15 per cent CAGR, and global artificial intelligence (AI) infrastructure scaling exponentially,” says Avasthi.

 

Supply-side constraints further strengthen the case. Mining output has remained muted, and recycling growth limited. “Silver supply has remained tight for the past three to four years and is expected to stay constrained. In addition, few new silver mines are being discovered, while the quality of existing ores is declining,” says Satish Dondapati, fund manager (ETF), Kotak Mutual Fund.

 

How do interest rates influence silver prices? 

Like gold, silver does not generate income, making price appreciation the sole source of returns. A low-interest-rate environment globally tends to support precious metals. “Expectations of more aggressive interest rate cuts may also push silver prices higher, as lower rates usually support precious metals. Historically, silver prices trade at around 1.8 per cent of gold prices, but currently they are close to 1.44 per cent. This suggests silver has room to move higher,” says Dondapati.

 

What risks could derail silver’s rally? 

After a strong year in 2025, changing commodity market dynamics could test silver’s momentum. “Silver’s rally could cool if the dollar strengthens again and real rates rise,” says Avasthi.

 

A reduction in geopolitical tensions could dampen the demand for precious metals as a hedge. “A reduction in geopolitical tensions would reduce safe-haven buying, which supports silver during uncertain times,” says Dondapati. Investors, therefore, should not expect a repeat of the outsized returns seen in 2025.

 

Why should investors brace for volatility? 

Silver tends to be more volatile than gold due to its dual nature. “Silver prices may remain volatile, particularly in the near term. Long-term investors should consider staggered or phased investments rather than lump-sum allocations,” says Vikram Dhawan, head—commodities and fund manager, Nippon India Mutual Fund.

 

What allocation strategy should investors follow? 

New investors should avoid the tendency to chase past returns. “Investors are advised to exercise caution in making large lump-sum allocations to silver at current levels. Instead, a phased investment approach through systematic investment plans (SIPs) or systematic transfer plans (STPs) in silver exchange-traded funds (ETFs) or mutual funds is recommended. Overall, precious metals exposure should be capped at around 15–20 per cent of the portfolio,” says Dondapati.

 

“After the massive run-up, new investors should enter gradually and stay cautious. Silver is a structural multi-year story, but timing matters in a high-volatility metal,” says Avasthi.

 

Those with excessive allocation may consider partial profit-booking. “Existing investors should stay invested as the long-term industrial super-cycle remains intact, but rebalancing on sharp spikes may be wise,” says Avasthi.

 

Are multi-asset funds a better option for cautious investors? 

Investors with low or moderate risk-taking ability may be better served by avoiding silver ETFs or funds. Instead, they should take diversified exposure through multi-asset allocation funds. “Multi-asset allocation funds offer a diversified and professionally managed way to gain exposure to gold, silver, and other asset classes within a single framework. Such funds are generally suitable for investors seeking balanced exposure and risk management,” says Dhawan. He adds that aggressive investors may consider adding dedicated silver ETFs or funds of funds, provided this fits within their broader portfolio strategy and risk profile. 

  The writer is a Gurugram-based independent journalist.