Can silver get even crazier? Inventory depletion, collapse of the gold-silver ratio, senior analysts call out a sky-high price of $300

Under the dual impetus of structural supply shortages and strong industrial demand, silver is becoming one of the most notable trading targets for 2025.

As one of the standout asset classes of 2025, silver futures prices have surged 154% this year, with an increase of about 40% just this month on a continuous futures contract basis. This unstoppable upward trend not only surpasses the performance of the stock market during the same period but has also attracted widespread attention from the market. UBS strategists have warned clients this week, pointing out that the recent gains in precious and industrial metals appear to be "out of control."

Renowned silver analyst and author of "The Great Silver Bull," Peter Krauth, believes that despite the risk of short-term pullbacks, silver prices are expected to challenge the historical high of $300 per ounce during the upcoming "frenzy phase."

He argues that the current rise is primarily driven by an imbalance in supply and demand fundamentals, and all factors supporting the sustained rise are already in place for "quite a long time." Although $50 per ounce has been viewed as a new price floor, Krauth emphasizes that as the market enters the "frenzy phase," the dramatic adjustment of the gold-silver ratio will become the core driving force behind rising silver prices.

Supply and Demand Fundamentals: Structural Deficits Support Long-term Bull Market

Krauth believes that the core logic behind the explosive rise in silver prices this year lies in the market's repricing of long-term structural deficits. He points out that the cumulative deficit over the past five years (including this year) is approximately 800 million ounces, which is nearly equivalent to an entire year's worth of mine supply. The Silver Institute, an international industrial association, predicts that this deficit situation will persist for the next five years.

In a recent interview with Ben Mumme, founder of Living Your Greatness Podcast, Krauth stated that as early as 2024, the market fundamentals had undergone a qualitative change due to a significant decline in inventories at major exchanges such as London, New York, and Shanghai. At that time, consumers could obtain physical silver through the delivery of futures contracts without forcing miners to increase supply. Now, as exchange inventories are depleted, the market is forced to confront this severe supply gap.

On the demand side, the enormous consumption of silver by solar panel manufacturers constitutes the mainstay of industrial demand, and newer, more efficient technologies mean that silver usage will further increase. Additionally, investment demand has also significantly exceeded expectations. According to The Silver Institute, this year, investment demand for silver-themed exchange-traded funds (ETFs) is expected to approach 200 million ounces, far exceeding the previous forecast of 70 million ounces.

The Logic of the "Frenzy Phase" and the $300 Target Price

Krauth's calculation of the $300 target price is based on a significant correction of the "gold-silver ratio." This ratio, which is the price of gold divided by the price of silver, represents the number of ounces of silver needed to purchase one ounce of gold. This ratio peaked at 104 in April of this year and has currently retreated to around 68 Krauth predicts that in the upcoming "frenzy phase," the ratio will plummet to 15.

According to his model, if the current gold price is approximately $4,500, dividing by the gold-silver ratio of 15 gives a target price for silver of $300. Although there are more aggressive predictions in the market (such as $800 to $1,000), Krauth believes these figures seem "quite crazy," and in contrast, his predicted path is more robust. He added that it may take "a few more years" to reach the $300 mark.

In addition to supply-demand imbalances, a weakening dollar, high government deficits, inflation concerns, and geopolitical risks are also important factors fueling the precious metals craze. However, Krauth warns that investors may not yet fully understand the depth of this supply-demand imbalance.

Regarding short-term trends, Krauth maintains a cautious and objective attitude. He pointed out that while silver is in an excellent market position and has broken through and confirmed the $50 bottom support in October, this does not mean the market will not experience corrections. "A slight adjustment in the near term would not surprise me," Krauth stated, but he firmly believes that the key factors supporting the market will continue to play a role for quite some time in the future