Silver poised for long-term gains on supply deficits

July 16, 2026 (MLN): Silver's long-term investment outlook remains strong despite recent sharp price declines, supported by persistent supply deficits, rising industrial and monetary demand, and tight physical market conditions, according to Paul Wong, Managing Partner and Market Strategist at Sprott Inc.

Wong said silver continues to benefit from multiple long-term demand drivers while supply remains constrained, creating a favorable environment for future price appreciation despite near-term volatility.

In a recent market analysis, Wong noted that silver recorded its largest monthly decline since September 2011 in June. For the quarter ended June 30, the metal fell 22.04%, marking its worst quarterly performance since the first quarter of 2020 during the COVID-19 market panic.

He attributed the selloff to expectations of tighter U.S. monetary policy, rising interest rates, and a stronger U.S. dollar, which also weighed heavily on gold prices.

Despite the correction, Wong said silver's long-term technical outlook remains among the most bullish across the precious metals sector.

He added that sharp price swings are a normal characteristic of silver due to its relatively small and less liquid market, and such corrections have historically been followed by strong rallies.

According to Wong, the silver market has been experiencing structural supply deficits for several consecutive years, steadily reducing global inventories.

He noted that limited new mining projects mean supply is unlikely to expand significantly, while demand continues to strengthen.

He said Sprott expects these deficits to persist for many more years, with the market likely to remain undersupplied as industrial consumption continues to grow.

Wong highlighted that demand is being driven by expanding use of silver in solar panels, electric vehicles, electrification, artificial intelligence infrastructure, data centers, and other advanced technologies.

He added that military applications are also becoming increasingly important due to silver's high conductivity and strategic value.

He also said speculative activity in the options market contributed to silver's sharp rally and subsequent decline, but noted that excessive positions have largely normalized, reducing the impact of speculative trading on prices.

Wong added that silver is also benefiting from rising monetary demand alongside gold, with investors increasingly viewing it as an alternative store of value during periods of currency debasement and economic uncertainty.

He further noted that tight physical inventories and strong delivery demand continue to support the market. According to Wong, growing physical ownership, particularly in Asian markets, could gradually reduce the influence of paper-market pricing mechanisms.

Looking ahead, Wong said silver's expanding role in essential industrial applications and increasing monetary demand are expected to create a stronger long-term price floor, replacing less critical uses such as photography and silverware.

He concluded that silver's combination of persistent supply shortages, expanding industrial consumption, growing monetary relevance, and tight physical market conditions continues to support a positive long-term outlook, KITCO reported.

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