While silver prices hover below $75 per ounce, Bank of America has issued a forecast predicting a "rise then fall" trajectory for the metal, suggesting there is still room for near-term gains, but the fundamental support for the rally is shifting.
In a recent report, the bank's commodity team, led by metals research head Michael Widmer, noted that silver could reach $100 per ounce by the fourth quarter of 2026, driven higher by the ongoing rally in gold.
However, the bank cautioned that this upward move is unlikely to be sustained over the long term. "While higher gold prices could push silver above $100 per ounce again in the coming months, we do not believe silver will consistently outperform due to weakening fundamental demand," the analysts wrote in the report.
Over a longer horizon, Bank of America expects prices to retreat, potentially returning to around the $75 per ounce range by the second quarter of 2027.
The report identifies a shift in demand structure as the core factor limiting silver's sustained strength. As prices continue to climb, downstream industries are actively seeking to reduce their reliance on silver.
Analysts pointed out that key sectors, such as solar photovoltaics, are employing technological measures to decrease silver usage and are even experimenting with lower-cost alternative materials. "We believe demand from this sector peaked last year due to a combination of factors, including manufacturers' incentive to conserve silver," they stated.
The direct impact of this demand contraction is a rapid change in the supply-demand balance. The report suggests that with industrial consumption declining, the current high price level could easily push the market back into a surplus.
Analysts further explained that silver's near-exponential price increase has significantly pressured photovoltaic manufacturers' profit margins, forcing them to accelerate "silver reduction" efforts. Under these conditions, the projected supply deficit for 2026 is expected to narrow substantially, with this year's deficit potentially shrinking by as much as 90%.
They warned that against a backdrop of a minimal deficit, even moderate investor selling could swiftly reverse the market balance toward a supply surplus.
Concurrently with its weakening industrial attributes, Bank of America believes silver's pricing mechanism is also evolving, likely moving closer to a precious metal logic rather than that of a pure industrial commodity in the future. "Investor demand may be key to future price action," the report noted.
Previously, silver's ability to consistently outperform gold was largely attributed to persistent structural supply deficits—expected to enter a sixth year—supported by stable industrial demand. In contrast, gold faced headwinds as rising interest rates and expectations of further hikes increased the carrying cost of the non-yielding asset.
The current gold-to-silver ratio stands at approximately 59.43, near the middle of its trading range in recent months.
Despite the overall cautious tone, Bank of America does not deny silver's underlying demand. Analysts emphasized that silver remains crucial in the solar industry, and even with reduced usage, a "cliff-like" drop is not anticipated. Furthermore, ongoing conflicts in regions like Iran continue to drive demand for green energy and oil alternatives, indirectly supporting silver consumption.
Regarding market structure, Bank of America highlighted that liquidity constraints could amplify price volatility. Earlier this year, silver prices briefly surged to $120 per ounce, partly due to investors and industrial users competing for limited physical supply.
Trade policy uncertainty adds another significant risk factor. As the United States, Canada, and Mexico renegotiate trade arrangements, silver could become a topic in these discussions.
The report indicated that U.S. global trade policies and the potential threat of tariffs on silver have prompted financial institutions and market participants to maintain higher inventories within the United States, somewhat constraining globally available supply. "The ongoing negotiations have such a large impact on the silver market because Canada and Mexico are the largest suppliers of silver to the U.S. Therefore, uncertainty regarding the direction of these talks is one reason for silver's rebound above $80 per ounce," the analysts said.
Simultaneously, internal market fund flows reflect caution: assets in physically-backed ETFs continue to decline, and the latest data from the U.S. Commodity Futures Trading Commission (CFTC) shows limited willingness to increase net long futures positions.
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