High Prices Are Starting to Erode Demand

Unlike gold, silver is not only a precious metal but also an important industrial input used in products ranging from smartphones and computers to solar panels and cars. As a result, silver is more sensitive to the economic cycle and more vulnerable when prices rise too sharply.

UBS believes that the current high price environment is starting to weigh on real demand. According to the bank, this process of “demand destruction” is likely to continue as long as silver remains at current levels. UBS also noted that silver lacks the kind of strategic support that gold enjoys, since it is not a major reserve asset held by central banks. That leaves silver more exposed to shifts in private investment flows and industrial demand.

Silver Remains Highly Volatile and Has Yet to Regain Its Strength

After its rapid surge, silver reached a peak on January 28, 2026, when it broke above $120 per ounce, before plunging nearly 30% in a single day. Although prices have recovered somewhat from the $67.60 per ounce low recorded on March 20, 2026, silver still remains well below levels seen before the Iran conflict.

In May, both spot silver and silver futures briefly climbed back to around $87 per ounce, but another wave of selling followed, leaving prices mostly consolidating around the $75 - $78 per ounce range over the past two weeks. By Thursday’s session, spot silver had fallen to around $72.13 per ounce.

Major Institutions Still Lean Toward a Cautious Outlook

HSBC believes silver is still fundamentally overvalued, with limited room for further upside. The bank expects the gold-to-silver ratio to widen, meaning silver could continue to underperform gold even if gold prices remain strong.

Meanwhile, Macquarie also sees little room for a strong rebound in silver. Its analysts expect average silver prices to remain near current levels for the rest of the year, but volatility is likely to stay elevated until tensions in the Middle East ease. Macquarie also warned of meaningful downside risk if the macroeconomic backdrop deteriorates further, especially if the Federal Reserve raises interest rates in the first half of 2027.

Conclusion

Silver still plays an important role in industry, but after such a sharp rally, the market has entered a more fragile phase. As real demand comes under pressure, while silver lacks the strong reserve-based support that gold enjoys, the metal may continue to face downside pressure. In the short term, silver remains a highly volatile asset, with risks that may outweigh the potential reward.

Source: CNBC