Silver prices are tarnished but not forgotten. Why HSBC thinks gains in white metal may be limited?

It has been a brutal ride for silver investors, with the white metal plunging nearly 60% from its record high of $121.79 an ounce in January to around $54. The sharp reversal followed a record-setting rally, with surging oil prices amid the Iran war stoking inflation concerns and shifting US Federal Reserve rate expectations, weighing heavily on precious metals.

Global investment bank HSBC says silver had tumbled to nearly $54 an ounce before prices stabilised. While there is room for further gains, the upside is likely to be limited. Gold prices will remain a key driver for silver, with HSBC maintaining a moderately positive outlook on bullion, which could help support the white metal.

HSBC believes silver prices are close to fundamentally justified levels and remains mildly positive on the metal. Industrial and jewellery demand is expected to weaken further, while institutional purchases, particularly from China and India, should support demand for large bars. Demand for coins and small bars may also recover, though at a moderate pace as high prices continue to weigh on buyers. Silver ETFs, which saw outflows earlier this year, are rebuilding their holdings.


However, a firm US dollar, as forecast by HSBC FX Research, and elevated yields could cap gains. If the anticipated interest rate hikes fail to materialise, silver prices could move higher. Fiscal profligacy and geopolitical risks are also expected to support prices.

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Supply to weigh on prices

Silver supply is expected to rise despite challenges to increasing mine output at elevated prices. Most mined silver is produced as a by-product of gold and base metals, limiting the scope for a rapid supply response to higher prices. Lower ore grades and mine closures this year are expected to be largely offset by new projects and capacity expansions. However, mine output is likely to increase significantly in 2027, HSBC said.

Mining costs remain well below prevailing silver prices, providing an incentive to raise production. Recycling is also expected to increase as bullion holders sell their holdings amid concerns over further price declines. Hedge supply is rising as well.

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Deficit to narrow

HSBC expects the silver market deficit to narrow sharply from 140 million ounces (moz) in 2025 to 5 moz in 2026, based on its supply-demand model and data from the Silver Institute’s 2026 Survey. The deficit is projected to widen slightly to 12 moz in 2027, with the narrowing this year partly attributed to investor liquidation in the first half of 2026.

The moderating deficits support HSBC’s view that silver prices are close to equilibrium levels, limiting the potential for strong rallies. However, persistent shortages of high-purity .9999 silver

could provide price support. Over the longer term, above-ground stocks and rising recycling supply could cap sharp rallies and weigh on prices.

Silver back to $100 levels?

The Middle East conflict triggered a chain of events that pushed silver prices lower. Rising oil prices intensified inflationary pressures, shifting monetary policy expectations and weighing on silver. Developments in Iran and expectations surrounding new Fed Chairman Kevin Warsh’s anti-inflationary policies have shifted market expectations from interest rate cuts at the start of the year to a more neutral stance, followed by the possibility of rate hikes.

These changing expectations, along with a stronger US dollar, weakened the case for holding silver and other precious metals. Declining investor and industrial demand added to the pressure on prices. Meanwhile, significant silver stocks held on COMEX began flowing back to London in the second quarter of 2026, easing physical market tightness and further weighing on prices.

The silver market may now be entering a consolidation phase, with prices likely to trend slightly higher. HSBC’s mildly positive outlook on gold is expected to support silver, helping limit downside. However, the brokerage does not expect a sharp rally in the near term and instead anticipates more moderate gains in 2027.

A strong US dollar, elevated yields in the US and other markets, weaker industrial and jewellery demand, and rising mine and recycling supply are likely to weigh on prices. Unless tariff concerns flare up again, HSBC does not expect silver to reach $100 an ounce in the foreseeable future.

Not a lot of downside either

HSBC said the sharp correction in silver prices has cleared out weaker long positions and brought prices closer to levels justified by fundamentals. This could help establish a floor for prices and encourage bullish investors to re-enter the market. While tighter monetary policies in the US and elsewhere remain a headwind, these expectations are already largely priced in. Any policy stance that is less hawkish than currently anticipated could support silver prices and trigger mild rallies.

Disclaimer: This article has been written by Veer Sharma, who is not a SEBI-registered Research Analyst or an Investment Adviser. Veer Sharma and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here.