Silver's Price at the End of February: A Structural Deficit vs. Volatile Headwinds

As of late February 2026, silver's price sits at a critical juncture. The spot price was $90.81 per ounce earlier this month, a level that had been a key technical benchmark. Just days before, the metal had surged over 4% to trade above $92 per ounce, hitting nearly two-month highs. That recent strength, however, stands in stark contrast to the powerful short-term volatility that has defined the month. Over the past 30 days, silver's price has fallen by 19.89%, a steep decline that has erased much of its recent gains.

This creates a clear tension. On one hand, the year-to-date rally remains breathtaking, with prices up over 173% from the lows of a year ago. On the other, the pullback from those highs has been severe and swift. The question for analysts is whether the current price of around $90 is above fundamental support or testing it. The recent surge to above $92 suggests strong buying interest at these levels, likely driven by a rotation into precious metals amid geopolitical and trade risks. Yet the over 15% drop in the past month shows how quickly that sentiment can shift, leaving the metal vulnerable to renewed selling pressure. The setup is one of a powerful structural rally facing significant short-term headwinds.

The Structural Deficit: The Underlying Price Floor

Beneath the month's sharp price swings lies a persistent and growing imbalance between supply and demand. The silver market is projected to face a sixth consecutive year of structural deficit in 2026, with a shortfall of 67 million ounces. This is not a temporary glitch but a sustained condition where industrial consumption continues to outpace the metal's physical production.

The supply side is expanding, but at a pace that falls short of demand. Total global silver supply is forecast to rise just 1.5% to a decade high of 1.05 billion ounces this year. Of that, mine production is expected to increase only 1% to 820 million ounces. This modest growth in output is being overwhelmed by resilient end-use demand, particularly in the industrial sector.

The photovoltaic industry is the standout driver. It accounts for 17% of total silver demand, or roughly 196 million troy ounces annually. This sector's needs are a major reason the deficit persists. While the recent price surge has prompted solar manufacturers to explore alternatives like copper to cut costs, the sheer scale of silver's use in photovoltaic paste means industrial demand remains a powerful, steady pressure on inventories. This fundamental deficit creates a structural floor for prices, as each year's shortfall draws down available stockpiles and tightens the physical market.

The bottom line is that the market is structurally undersupplied. Even with supply reaching a new high, the deficit is projected to widen to 245 million ounces over the next three years. This persistent imbalance provides a clear rationale for the metal's long-term price trajectory, acting as a counterweight to the short-term volatility that has dominated recent trading.

The Volatility Test: Policy Shocks and Industrial Pushback

The recent rally that pushed silver to nearly two-month highs was supercharged by a specific policy shock. The metal benefited from a massive "debasement trade," triggered by the US administration's move to invoke Section 122 for a 10% global tariff, with markets pricing in a potential escalation to 15%. This protectionist shift, following a Supreme Court ruling, created a flight-to-safety dynamic that rotated capital into precious metals like silver. The rally was further fueled by geopolitical tensions and a flight from AI infrastructure equities, even as a hawkish Fed outlook and a resilient dollar posed headwinds.

Yet this policy-driven surge has already sparked a powerful industrial response that threatens to alter the demand trajectory. The 130% rally over the past year has squeezed solar panel margins, prompting intensified efforts to replace silver paste with copper. This is not a theoretical shift but a cost-driven imperative. Silver paste makes up 30% of total solar cell costs, making it the single largest manufacturing expense in the sector. With silver fetching $2.5 million per metric ton, the incentive to switch is enormous.

The industry is moving quickly. Leading manufacturers like Longi Green Energy have announced plans for mass production of copper-based and hybrid silver-copper pastes by mid-year. Analysts forecast this shift could save the global solar sector roughly $15 billion annually. This creates a clear feedback loop: higher silver prices drive substitution, which could eventually dampen industrial demand and ease the structural deficit that has supported prices. For now, the policy shock has amplified volatility, but the industrial pushback it has triggered may prove to be a more durable pressure on the demand side.

Catalysts and Risks: What to Watch for a Price Break

For investors, the path forward hinges on three key watchpoints that will determine whether the structural deficit thesis can withstand the current volatility or if a correction is imminent. These are the metrics and events that will signal a shift in the market's physical and policy underpinnings.

First, monitor COMEX silver inventories for signs of a physical supply glut or shortage. This is the most direct gauge of market tightness. A sustained rise in the inventory level held in COMEX-approved warehouses would indicate a surplus, potentially capping prices and challenging the deficit narrative. Conversely, a continued drawdown would reinforce the story of a tight physical market, supporting the structural floor. Given the recent price swings, any significant movement in this benchmark is a critical early warning.

Second, watch for clarity on US tariff policy under Section 122. This is the major near-term driver of the "debasement trade" that supercharged the recent rally. The current setup, with markets pricing in a potential escalation to a 15% tariff, creates a powerful, policy-driven demand shock. Any shift in the administration's stance-whether a delay, scaling back, or formal implementation-would directly impact this speculative trade. The volatility seen in the past month shows how sensitive the metal is to these geopolitical and trade signals.

Third, track the pace of silver substitution in solar manufacturing. Accelerated adoption of copper-based or hybrid pastes would be a bearish signal for long-term industrial demand. The industry is moving quickly, with leaders like Longi Green Energy planning mass production by mid-year. Analysts forecast this shift could save the sector roughly $15 billion annually. While the transition faces technical hurdles, any acceleration would directly attack the core industrial demand that sustains the structural deficit. The bottom line is that the policy-driven rally has sparked a cost-driven response; the speed of that response will be a key determinant of the deficit's future trajectory.