Precious metals experienced a notable correction, with gold falling 30% and silver a more dramatic 53% from its January peak of $121.64 an ounce to around $57.6 in June. This reset in valuations and positioning, however, suggests that silver may offer greater upside potential compared to gold in the near future, according to analysis by Monarch PMS.
While gold maintains its strong structural case, silver presents a unique combination of monetary demand, a persistent physical supply deficit, and a tightly leveraged market. These factors could lead to sharper gains for silver when market sentiment shifts positively.
The Widening Silver Deficit
Silver is currently in its sixth consecutive year of a physical deficit, with the shortfall projected to widen to 46.3 million ounces in 2026 from 40.3 million ounces in 2025. Since 2021, a cumulative 762 million ounces has been drawn from above-ground stocks to meet demand.
The supply response to this demand remains unusually slow. Global mine production has been largely flat since 2015, hovering between 830-850 million ounces annually. Most silver is produced as a byproduct of other metals like copper, lead, and zinc, meaning new silver-focused mines are rare and take nearly a decade from permitting to production. This structural constraint limits how quickly higher prices can bring additional supply to the market, a challenge gold does not face to the same extent.
Solar Demand Shifts, Deficit Persists
One area of concern for silver demand has been the solar panel industry. Photovoltaic silver consumption is forecast to decline by 19% in 2026, following a 6% drop in 2025. However, Monarch PMS attributes this decline primarily to “thrifting”—the use of less silver per solar cell—rather than outright substitution.
Reducing silver content has practical limits before affecting cell efficiency and reliability. Furthermore, widespread commercial adoption of copper substitution in dominant TOPCon technology is not expected until 2028-30. Crucially, the deficit has continued to expand even with this reduction in photovoltaic demand, underscoring the strength of the underlying supply-side constraints.
Paper Leverage and Market Structure
Silver's market structure, particularly its paper leverage, is another factor Monarch PMS highlights for its asymmetric upside potential. COMEX registered inventories stand at approximately 96 million ounces, covering only 17.8% of outstanding paper claims, indicating an estimated paper leverage of around 5.6x.
This leverage is a double-edged sword: it contributed to silver's sharp 53% correction. However, when physical availability tightens and investment demand rebounds—with physical investment demand forecast to rise 20% and US retail demand expected to jump 57% in 2026—this same structure can significantly accelerate an upside move.
Valuation Comparison: Silver vs. Gold
Monarch's valuation framework suggests a modelled range for silver between $54-$77 an ounce, with a midpoint of $65. At $61.7 on August 6, silver was trading about 6% below this midpoint. In contrast, gold was approximately 8% above its $3,922 midpoint, trading at $4,242.
This valuation difference gives silver a potentially more attractive risk-reward profile. While silver is known for its higher volatility and capacity to fall harder and faster than gold, the recent correction has flushed out leverage and reset the gold-silver ratio from 46x to about 69x. Monarch PMS believes that after this reset, silver is now better positioned for the next phase of the precious metals rally.