Silver Prices Retreat Locally as Dollar Strengthens, Global Market Dynamics Remain Mixed

Silver prices declined in local markets during Thursday’s trading, following a drop in the global ounce price, amid a stronger U.S. dollar and pressures on precious metals after U.S. economic data weakened expectations for near-term interest rate cuts, according to a report from the Safe Haven Center.

The report stated that the price of 999-grade silver dropped by about 2 EGP to reach 150 EGP per gram, while the global ounce fell by around $2 to $83. Silver graded 925 traded at approximately 139 EGP per gram, 800-grade silver at 120 EGP, and the silver pound remained steady at 1112 EGP.

Globally, silver fell by about 0.7% after strong gains the previous day, while the U.S. dollar strengthened following better-than-expected employment data, negatively affecting silver as a non-yielding asset. Investors are closely monitoring upcoming inflation reports and unemployment claims for signals on the future path of U.S. monetary policy.

Strong Demand Despite Industrial Slowdown

Despite the recent declines, the World Silver Institute expects total global silver demand to remain robust in 2026, supported by higher investment demand even as some industrial sectors, including solar energy, experience a slowdown.

Investment demand is expected to rise by about 20%, reaching 227 million ounces—the highest in three years—driven by strong prices and ongoing economic uncertainty. Investment demand in India is also expected to continue growing.

Conversely, industrial demand is forecast to decline by 2% to around 650 million ounces, the lowest level in four years, mainly due to reduced silver use in solar panel production and the search for alternative technologies.

Demand for silver jewelry is expected to fall by over 9% to 178 million ounces, the lowest level since 2020, due to high prices, with India experiencing the largest drop. China is expected to be an exception, showing slight growth supported by innovative products and increased interest in gold-plated silver items.

Supply Rises but Deficit Persists

Global silver supply is projected to increase by 1.5% to 1.05 billion ounces in 2026, the highest in ten years. However, this will not fully close the gap, as the market is expected to remain in deficit for the sixth consecutive year, with a shortfall of approximately 67 million ounces.

Prices have recently stabilized above $80 per ounce, with volatility easing compared to last month, amid continued supply-demand imbalance, geopolitical uncertainty, and U.S. policy ambiguity. Silver prices have risen about 11% since the start of 2026 through February 9, while holdings in silver-backed ETFs globally are estimated at approximately 1.31 billion ounces.

Investment Drives Prices; Industrial Demand Falls

Investment is expected to be the main driver of silver price increases this year, amid slower economic activity and weaker industrial consumption. In contrast, high prices are likely to suppress demand for jewelry and other manufactured items.

Physical silver investment is projected to rise 20% to 227 million ounces, the highest in three years. After three consecutive years of decline, Western markets are expected to see a rebound in physical investment in 2026, supported by strong prices and continued economic uncertainty. Industrial demand is expected to fall by 2% to 650 million ounces, mainly due to solar panel production.

Despite the decline in the solar sector, the global shift toward electrification supports broader industrial silver demand. Applications in data centers, AI technologies, and the automotive sector partially offset the reduction in solar-related consumption.

J.P. Morgan: Higher Floor, Unclear Ceiling

Similarly, J.P. Morgan Global Research analysts note that silver is establishing a higher price floor in 2026, though the ceiling remains uncertain. The metal is attempting to close its historical gap with gold, with the gold-to-silver ratio near its lowest level in 15 years following extreme early-year volatility.

The bank attributes part of recent price movements to U.S. trade policy, including the Section 232 review of critical minerals, and the nomination of Kevin Warsh as Federal Reserve chair, which coincided with a sharp sell-off in precious metals and a stronger dollar.

While structural factors support silver prices, analysts warn that higher prices may accelerate the adoption of silver-free technologies in solar panel production or reduce silver usage per panel. Industrial applications account for roughly 60% of total silver demand (excluding ETF flows), meaning technological shifts could significantly affect market balances in the coming quarters.

In the short term, investment demand remains the main driver, particularly with strong influence from Chinese and Indian investors. Unlike gold, silver lacks structural central bank support, leaving it more exposed to swings in the gold-to-silver ratio.

J.P. Morgan forecasts an average silver price of $81 per ounce in 2026, with the fourth quarter expected to reach $85 per ounce. The average price in 2027 is projected to be around $85 per ounce as well.

Amid short-term pressures from the dollar and monetary policy, and long-term support from ongoing deficits and strong investment demand, silver remains in a volatile range, with its ultimate direction dependent on global economic developments and industrial shifts.