Silver has been on an extraordinary run over the past year.
The precious metal is now trading around US$88 per ounce, putting it close to historic highs and leaving it almost 170% higher than a year ago.
After a volatile start to 2026, silver has rebounded strongly as investors return to precious metals and supply pressures tighten.
The rally is also lifting investment products linked to the metal.
One example is Global X Metal Securities Australia Ltd (ASX: ETPMAG), which provides exposure to physical silver held in secure vaults.
At the time of writing, the physical silver-backed ETF is priced at $114.74, up 5.24% today.
So, what is driving the rally? Let's take a closer look.
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Structural supply shortages supporting prices
One of the biggest factors pushing silver higher is a persistent shortage of physical supply.
According to recent reports, the silver market is expected to record its 6th consecutive annual supply deficit in 2026, with global demand continuing to exceed mine production.
Last year alone, demand outstripped supply by about 95 million ounces, and cumulative deficits over the past several years have exceeded hundreds of millions of ounces.
Investment demand has also remained strong, with investors continuing to buy silver bars, coins, and exchange-traded products.
Industrial demand remains strong
Silver plays an important role across a wide range of industries.
It is widely used in solar panels, electronics, batteries, and technologies linked to artificial intelligence (AI) infrastructure and electric vehicles.
This dual role as both an industrial metal and a precious metal makes silver distinct from many other commodities.
Demand for silver is closely tied to manufacturing activity and the expansion of technologies that require high electrical conductivity.
At the same time, periods of geopolitical tension and economic uncertainty often increase investor interest in precious metals.
A weaker US dollar helping precious metals
Another factor influencing silver prices has been movements in currency markets.
Precious metals are priced in US dollars. When the US dollar weakens, commodities such as silver become cheaper for buyers using other currencies.
This can affect international demand for the metal.
Recent volatility in global markets and shifting expectations around interest rates have also increased investor attention on the white metal.
What happens next?
Silver has already experienced a significant rally over the past year.
However, the global silver market remains relatively tight, with demand continuing to exceed supply in recent years.
Ongoing movements in industrial demand, currency markets, and precious metal investment flows are likely to remain key factors influencing silver prices through 2026.
