Guotai Haitong: Silver commodity attributes resonate with financial attributes, and the expected continuous supply-demand gap will drive the central price of silver upwards.

Guotai Haitong released a research report stating that the two major attributes of silver are in strong resonance: on the commodity side, industrial demand for silver has increased to nearly 60%, with emerging areas becoming the core of growth; on the financial side, in a loose global liquidity environment, silver is linked to gold and becomes a preferred option for capital hedging. From a long-term perspective, the demand for silver in sectors such as photovoltaics, new energy vehicles, and artificial intelligence is increasing, and the supply-demand gap may continue to exist, providing momentum for the rise in silver prices. Against the backdrop of the continuing anticipation of a rate cut by the Federal Reserve, a weakening US dollar and improved global liquidity will push silver prices higher. Silver prices will directly impact the profitability of silver mining companies, with resource-based enterprises owning high-grade silver mines benefitting the most from the rise in silver prices. Guotai Haitong's main points are as follows: Short-term inventory disturbances have resulted in significant volatility in silver prices. Over the past five years, global visible silver inventories have shown a decreasing trend, with the COMEX inventories continuing to decline in the short term, LMBA inventories decreasing by around 10,000 tons from their 2021 peak, and silver inventories in the Chinese market also falling to a low level. In the short term, the London silver market's leasing rate remains high, posing a certain "squeezing" risk. In 2026, the spot price of silver in London broke through $118 per ounce, reaching a historical high, before falling back, resulting in short-term sharp fluctuations in silver prices. Silver has both financial and commodity attributes, with its price direction mainly determined by its financial attributes, while its commodity attributes provide price elasticity, with the gold-silver ratio showing "wide fluctuations and mean reversion". Looking at historical data since 2000, the central value of the gold-silver ratio is around 68, and the main reasons for the sharp decline in the gold-silver ratio are a loose monetary policy, a surge in industrial demand, and various factors contributing to capital rotation. After reviewing several major declines in the gold-silver ratio since 2000, the bank found that during periods of continued decline in the gold-silver ratio, silver often rises with gold, and the increase in silver prices is usually 3-4 times that of gold. In a macroeconomic environment of economic recovery or ample liquidity, the industrial attributes of silver become more prominent, providing greater elasticity compared to gold. Silver's independent silver mining capacity accounts for less than 30%, with mining costs rising and supply growth weakening. According to data from the US Geological Survey, global silver reserves reached 640,000 tons in 2024, growing slowly overall. From the supply side of silver mining, Mexico, China, and Peru accounted for 50% of global production in 2024, with global silver production mainly from by-products of copper, lead, and zinc smelting, with less than 20% coming from independent silver mining capacity. In addition, the growth in silver production from mining is slow due to declining ore grades, low capital expenditure, and stricter environmental policies, with less than 20% of recycled silver, leading to weak growth in silver supply in the future. Silver is an indispensable AI metal, with its industrial attributes driving demand. According to the Silver Institute, a global supply-demand gap for silver has persisted since 2021. Emerging industrial demand represented by photovoltaics, new energy vehicles, and artificial intelligence continues to grow, and silver is an essential metal in the AI field, with its high electrical and thermal conductivity, low contact resistance, and other attributes determining its strategic position in the AI era. Furthermore, in the context of a strong precious metals market, investment demand for silver is positively correlated with price increases, with investment demand being an incremental source of silver demand. Risk warning: fluctuations in the Federal Reserve's interest rate-cutting policy, macroeconomic fluctuations, changes in the supply side, and further development of de-silvering technology.