As investors seek safe haven assets to hedge against the growing uncertainty in the economy and financial markets, silver continues to underperform gold. However, due to strong industrial demand outweighing the continuously decreasing supply, silver is expected to continue performing well.

On Wednesday, the Silver Institute released its "2025 Silver Survey," predicting that this precious metal will experience a shortage for the fifth consecutive year, but the degree of imbalance will be the smallest in four years.

According to a report compiled by Metals Focus, due to a slight decrease in silver demand to 1.148 billion ounces, the total supply has increased by 1.5% with an increase in mine production, and it is expected that there will be a shortage of 117 million ounces of silver.

It is expected that the industrial demand for silver will remain relatively unchanged this year, at approximately 677.4 million ounces. The report states that due to the growth in automotive end use, grid investment, and consumer electronics products exceeding the decline in the solar industry, it is expected that demand for electrical and electronic products will moderately increase by 1% this year.

At the time of the report's release, due to heightened concerns about the global economy, the silver market experienced significant volatility, with silver performing worse than gold. At present, the gold silver ratio is hovering around a 5-year high above 100 points.

Silver has been struggling in recent weeks due to investors' concerns that if the global economy falls into recession, industrial demand may be damaged.

But Philip Newman, Managing Director of Metals Focus, said that even after five years of supply shortages, the market is far from achieving self rebalancing.

He added, "Ultimately, we still believe that the shortage situation will continue for a few more years, which should be favorable for prices, but we may continue to see some fluctuations in the short term

Although some countries have withdrawn their green energy initiatives, Newman stated that the global transition to green energy is unlikely to come to a complete halt.

He said: "Some people may say that the government may cut its spending on green energy, but at the same time, many people remember how oil prices have fluctuated since the Russia-Ukraine conflict. So I think we still urgently need to get rid of fossil fuels and achieve energy diversification."

At the same time, the increasing electrification of the global economy will continue to support silver.

He said, "The advantage of the silver market lies in its diversity. Even in times of economic recession, I don't think you will see a sharp decline in demand. There are always some risks, but I do see some resilience in the silver market

Although industrial demand for silver has been driving down its price relative to gold, Newman stated that he does not believe this is the main obstacle for investors. After two years of disappointing investment demand, Metals Focus expects investors to increase their silver exposure by 70 tons, a 14% increase from last year.

He added that as investors seek safe haven value in the precious metal market, economic uncertainty may boost investment demand.

As the amount of silver on paper increases, Metals Focus sees some stability in physical silver. The report states that demand for silver bars and coins is expected to increase to 204 million ounces, a 7% increase from 2024.

The demand for silver bars and coins is expected to partially recover in 2025 after two years of weakness, "analysts said in the report." Europe may experience a slight recovery, led by Germany, returning to normalcy after two years of severe decline

Silver is highly volatile, but Newman points out that while some investors may be disappointed with its performance relative to gold, others may see opportunities due to the gold silver ratio being at a multi-year high. The historical average level of the gold silver ratio is about 60 points.

He said, "Some investors are thinking, 'This won't continue like this, this ratio must be lowered.' Even if the ratio is 80 or 75, the silver price will be very close to $40, which is not that drastic

Newman stated that price increases will be the biggest factor in changing the imbalance between silver supply and demand. He pointed out that although there are a large amount of silver reserves in the world, the price must be significantly higher than $35 per ounce before investors consider putting these metal supplies into the market.

Although silver faces some challenges this year, Metals Focus expects silver prices to still receive good support.

The analyst stated in the report, "We believe there is still further room for silver prices to rise. We believe that in the coming months, we will see new cyclical peaks, surpassing the 2024 peak and reaching levels not seen in many years. Given silver's recent poor performance, we also expect it to catch up with gold at some point as investors seek value. However, considering that silver inventories are still sufficient and there is currently safe haven buying for gold, this situation may not occur in 2025