Despite the silver market heading for its sixth consecutive annual supply deficit, Mike McGlone, Senior Market Strategist at Bloomberg Intelligence, believes this fundamental positive may not be sufficient to drive silver prices back to the highs seen this past January.
In his latest analysis report on the silver market, he reiterated his relatively cautious long-term outlook. He stated clearly that silver prices may fluctuate within a range of $50 to $100 for an extended period, making a significant trend-based breakout difficult.
Current market trends show that silver prices have struggled to sustainably break above the key resistance level of $80 per ounce. While short-term rebounds remain possible, McGlone noted that the overall price performance is relatively weak, making it difficult to sustain a strong upward trend.
McGlone does not entirely rule out the possibility of silver prices surging back towards the January highs above $120 per ounce. However, he emphasized that any substantial price increase would trigger a fundamental shift in supply and demand dynamics.
"A key conclusion is that the existing supply deficit would transform due to a parabolic price rise, potentially entering a corrective phase driven by lower prices," he stated.
McGlone pointed out that the current price action in silver bears strong similarities to historical parabolic advances. The rally, which began around mid-2025, at its peak reached a premium of 2.6 times its 10-year moving average, highly consistent with characteristics of the major rally in 2011.
"We see clear similarities between the two. With silver currently around $79, it appears poised to linger in the $50 to $100 range for a considerable time. The risk of a normal mean reversion leans more towards the 10-year moving average near $33 than sustaining prices above $100 long-term," he wrote in the report.
Additionally, McGlone highlighted that silver's 180-day volatility is currently more than five times that of the S&P 500, reaching its highest level since 1980. Back then, silver peaked near $50, a level matched in 2011 and only surpassed in 2025.
According to the latest annual Silver Survey Report from the Silver Institute, the global silver market is projected to see a supply deficit of 46.3 million ounces in 2026, marking the sixth consecutive year of shortfall. However, McGlone argues that the scale of this deficit could be offset by self-correcting mechanisms triggered by high prices.
The report indicates that industrial silver demand is forecast to decline by 3% this year, primarily dragged down by a 19% drop in silver usage for photovoltaic solar panels. Meanwhile, investment demand is expected to be the main market support, projected to grow by 18% year-on-year, with silver-backed Exchange Traded Products (ETPs) anticipated to see inflows equivalent to approximately 30 tonnes of physical metal.
McGlone believes that despite the structural deficit, high prices themselves would stimulate increased mine production, higher recycling rates, and industrial substitution, thereby limiting the potential for further significant price increases.
Mike McGlone's analysis suggests that while the fundamental backdrop for silver remains supportive due to supply deficits, the self-correcting effects on supply and demand from rapid price appreciation, coupled with historical mean reversion pressure, will collectively constrain price performance. He anticipates that silver will likely continue to trade within a wide range of $50 to $100 for the foreseeable future, making a swift return to previous highs challenging.
For investors, McGlone's perspective serves as a reminder that while the long-term deficit narrative is important, the practical impact of price increases on supply and demand dynamics must be closely monitored. Amid current global economic uncertainties, silver, with its dual nature as both an industrial and investment asset, continues to face significant challenges for its price trajectory.
Overall, while the fundamental backdrop for the silver market remains supportive, the likelihood of a major breakout in the short term is low. Investors are advised to maintain caution and pay attention to changes in industrial demand, macroeconomic trends, and the combined influence of geopolitical factors on silver prices.
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