Silver to stay hot as supply thins amid buyer frenzy

Demand for silver has soared on the back of rising industrial use and investor frenzy, but supply remains constrained.

- Dipali Banka & Nehal Chaliawala

This demand-supply mismatch is unlikely to ease in the near term, according to experts, which may see prices increase further.

About 75% of the world's silver is produced as a byproduct of mining zinc, copper and gold; so, output can’t easily increase unless production of those main metals also rises from existing mines. Contributing to the supply squeeze is the fact that the quality of ore of existing primary silver mines—which account for the remaining fourth of global silver production—is also deteriorating.

“Silver production is unlikely to increase significantly because, unlike oil, it can’t simply be ramped up through more mining,” said Vishal Iyer, partner at Rational Equity Partners, a boutique investment management firm with investments in gold and silver mining companies.