Silver faces short-term dip but long-term outlook remains strong

Dubai: Silver prices saw a brief pullback this week, but analysts say the longer-term outlook remains positive due to rising industrial demand and tight supply.

Silver dipped sharply on Wednesday, falling 1.4% within five minutes after cautious comments from China’s Vice Premier about trade negotiations with the United States. While the remarks were not overtly negative, they reminded markets that trade tensions remain unresolved.

“Markets were hoping for smoother trade talks, and any sign of friction adds uncertainty. That’s what caused the quick drop in silver,” said Daniela Sabin Hathorn, senior market analyst at Capital.com.

Despite the short-term volatility, Hathorn noted that silver is still holding near recent highs around $36.50, supported by strong demand and limited supply. The Relative Strength Index (RSI), a technical indicator used by traders, shows that silver may be cooling off slightly after a strong rally but remains in an overall uptrend.

A key factor to watch in the coming days is the upcoming U.S. inflation data (CPI). A softer reading could encourage expectations of lower interest rates, which may boost silver and other precious metals.

Unlike gold, silver is used heavily in industries such as solar panels, electronics, and electric vehicles, making it more sensitive to global economic trends. Recent optimism about improving US-China trade ties and global growth has increased investor appetite for silver, helping it outperform gold in recent weeks.

One sign of this trend is the declining gold-silver ratio, which measures how many ounces of silver equal one ounce of gold. A falling ratio suggests silver is gaining more investor attention.

On the supply side, silver production faces major challenges. Only about 70% of silver comes from mining, and much of that is a byproduct of other metals like copper and zinc. Recycled silver, which makes up just 20% of global supply, is also limited, especially from sources like old electronics and solar panels.

“The industry is underinvested. There hasn’t been enough focus on new silver mines or recycling infrastructure,” Hathorn said. “At the same time, demand is growing—especially from green technology sectors. This mismatch between supply and demand is supporting higher prices.”

As the global shift to renewable energy and electric vehicles continues, silver's role in the green economy is becoming more critical. That structural demand, combined with limited new supply, could drive prices higher in the months and years ahead.