Why Invest in Silver? Industry, Supply and Risks
Why invest in silver? If you invest in silver, you are buying a metal with two faces: it serves as a store of value and is at the same time an important raw material for solar cells and electronics. This page explains where demand comes from, what lies behind the much-cited supply deficit and what disadvantages silver has compared with gold. Past performance is no guarantee of future results.
What is silver used for?
Silver conducts electricity and heat better than any other metal. That is why it is found in solar cells, electrical contacts, circuit boards and vehicle electronics. According to The Silver Institute’s World Silver Survey 2026, global silver demand in 2025 was 1.13 billion ounces, 2% less than the previous year.
Of this, 657.4 million ounces went to industry, a decline of 3%. Industry thus accounts for around 58% of total demand. The rest is split between jewellery, silverware, and bars and coins. This mix fundamentally distinguishes silver from gold, which is mainly bought as jewellery and as an investment.
Photovoltaics: a major buyer facing headwinds
The solar industry is the largest single industrial buyer. In 2025 it consumed 186.6 million ounces, according to the World Silver Survey, 6% less than the previous year. That is around 28% of industrial silver demand.
There is a clear reason for the decline: silver paste accounts for around 10 to 20% of the cost of a solar cell. When silver prices are high, manufacturers therefore use less silver or partly replace it with other materials. For 2026, The Silver Institute expects photovoltaic demand to fall by a further 19% or so. More solar installations therefore do not automatically mean more silver consumption.
Electronics, power grids and data centres
Demand from electrical and electronics applications fell by 2% in 2025, according to The Silver Institute. The institute sees growth in the expansion of power grids, in vehicle electronics and in data centres for artificial intelligence.
In The Silver Institute’s assessment, these areas have so far not offset the decline in photovoltaics. Industrial demand therefore depends heavily on the technology decisions of individual industries – and on the economy.
How solid is the supply deficit?
In 2025, demand exceeded supply for the fifth year in a row. According to the World Silver Survey, the deficit was 40.3 million ounces. At the same time, mine supply rose by 3% to 846.6 million ounces and recycling by 2% to 197.6 million ounces.
For 2026, The Silver Institute estimates a deficit of 46.3 million ounces. In February 2026 it had still expected around 67 million ounces. Such estimates therefore change considerably. Moreover, a deficit does not mean that silver is running out: it is covered from existing above-ground stocks. No particular price can be derived from it.
Silver fluctuates more than gold
The silver market is considerably smaller than the gold market. In London trading in June 2026, silver worth $12.9 billion was transferred daily, according to the LBMA; for gold the figure was $70.9 billion. Smaller markets react more strongly to inflows and outflows.
On average over the past six decades, annualised volatility was around 29% for silver and around 16% for gold (BullionVault analysis). Silver can rise sharply in a short time, but it can fall just as sharply. The same amount invested in silver therefore usually leads to much larger swings in a portfolio than in gold.
VAT: the cost disadvantage in Germany
The VAT exemption for investment gold under § 25c UStG applies only to gold. In Germany, silver bars are subject to the standard rate of 19% (§ 12 UStG). The silver price must therefore first rise by this surcharge before you can sell without a loss.
One way around this is storage in a bonded warehouse outside the EU. Spargold stores silver in the bonded warehouse ‘The Reserve’ in Singapore. As long as the metal remains there, the purchase is VAT-free, according to Spargold. As with gold, § 23 EStG applies to gains: after a holding period of more than one year, they are tax-free in Germany.
