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Silver is heading into its sixth consecutive year of supply shortfalls, yet the metal can’t seem to catch a bid. On Wednesday, XAG/USD traded around $75.20 an ounce in European hours, recovering modestly from a near-two-week low of $73.10 hit the previous day. But the bounce looks fragile as two powerful forces—a hawkish Federal Reserve and a sharply revised deficit forecast from UBS—combine to cap upside momentum.
The latest wrench came from the Fed minutes released on May 20, which laid bare the central bank’s reluctance to ease. The policy rate was left unchanged at 3.50%–3.75%, but a majority of participants signaled that further tightening would be appropriate if inflation remains stubbornly above the 2% target. Many officials also wanted to remove language the market had interpreted as a dovish signal. For a non-yielding asset like silver, higher interest rates are a direct headwind, making bonds more competitive. The 10-year US Treasury yield surged to 4.69%—the highest in over a year—while the 30-year yield climbed to 5.2%. At the same time, the US dollar index hit a six-week high of 99.47, further discouraging buyers outside the dollar bloc.
Adding to the macro pressure, UBS delivered a sobering reassessment of the supply-demand balance. The Swiss bank slashed its year-end 2026 price target from $85 to $80 per ounce and cut its second-quarter 2026 estimate even more aggressively, from $100 to $85. But the crucial detail was the deficit revision: UBS now expects the global silver market to post a deficit in the high double-digit millions—roughly 60 to 70 million ounces—down from its previous forecast of 300 million ounces. The bank cited weaker photovoltaic demand, falling purchases of jewelry and silverware, lower investor flows, and slightly higher mine production expected at around 850 million ounces in 2026. The narrative of acute scarcity, which had helped underpin prices, has been significantly dialed back.
That industrial demand engine has been sputtering for some time. According to the World Silver Survey 2026, physical demand from industry dropped 3% in 2025 to 657.4 million ounces, and further erosion to 639.6 million ounces is expected this year. The solar sector is the main drag, as manufacturers reduce silver content per unit or substitute the metal outright. While demand from AI infrastructure, automotive electronics, and power grids remains constructive, it is not enough to offset the decline in photovoltaics. Geopolitical tensions in the Middle East add a layer of complexity: higher energy prices could stoke inflation expectations and push the Fed’s rate path higher, indirectly punishing silver rather than providing a safe-haven bid.
Technically, the chart looks precarious. The relative strength index stands at 31—flirting with oversold territory—and the MACD is negative. After breaking out of its uptrend channel, silver could test support at $71 an ounce. On the upside, resistance is stacked at $76.33 and $78.25, levels that need to be reclaimed to signal a durable stabilization.
For now, the market’s attention is fixated on incoming inflation data, employment figures, and further Fed commentary. The $75 handle acts as a near-term pivot: holding above it keeps the recovery narrative alive, but with yields elevated and the silver deficit story softening, the burden of proof lies firmly on the bulls.
Silver slumped 5% on Tuesday to around $73.78 an ounce, pushing its monthly loss past 7% as investors squared off against a toxic mix of policy tightening and sliding industrial consumption. The selloff coincides with the release of the Federal Reserve’s meeting minutes this week, which market participants expect to reinforce a cautious stance after April’s third consecutive rate hold at 3.5%–3.75% – a decision that saw four FOMC members dissent for the first time since October 1992. Hawkish undertones from the central bank have driven the implied probability of a June rate cut below 3%, according to the CME Group, and Morgan Stanley now forecasts rates will stay unchanged through 2027 – a punishing backdrop for an asset that pays no yield.
The photovoltaic industry, once a reliable engine of silver demand, is scrambling to contain costs. The World Silver Survey 2026 from Metals Focus reports that PV silver consumption dropped 6% in 2025 to 186.6 million ounces and is expected to tumble another 19% this year to roughly 151 million ounces. The reason is stark: silver now accounts for as much as 29% of module costs, prompting Chinese producers to lead an aggressive substitution drive. Yet the technology transition is not entirely one-sided. Research from Ghent University shows that newer cell architectures such as TOPCon require 1.5 times more silver than conventional PERC designs, while heterojunction (SHJ) cells need twice as much – meaning substitution is racing against a counter-current of rising per-unit silver intensity.
On the supply side, the market remains structurally constrained. Roughly 70% of global silver output is a by-product of copper, lead and zinc mining, so higher prices do not automatically translate into higher production. As a result, the Silver Institute projects the sixth consecutive annual deficit at around 46 million ounces. UBS strategists have taken a more bearish view, slashing their 2026 demand forecast to just 300 million ounces, which would shrink the global deficit to between 60 and 70 million ounces but still leave the market in the red. Cumulative stock withdrawals since 2021 have reached nearly 762 million ounces, and COMEX inventories have plunged from 531 million ounces last October to about 315 million ounces. Despite this physical tightening, near-term price action is being dominated by rates and demand concerns.
New consumption vectors are beginning to emerge, offering a longer-term anchor for the white metal. The growing build-out of data centres for artificial intelligence, the expansion of 5G networks, and the ramp-up of electric-vehicle production all require silver’s unique electrical conductivity. These sources of demand are still in their infancy relative to the solar sector, but they could eventually help offset the photovoltaic slowdown.
Analyst forecasts underscore the uncertainty. The LBMA survey sees silver averaging $79.57 an ounce this year, albeit with a wildly wide trading range of $42 to $165 – a reflection of just how much is hanging in the balance. The Reuters consensus sits just shy of $80, while Citigroup has out a bullish $110 target for 2026. For now, the metal is caught between a hawkish central bank and a shifting industrial landscape, with the next major catalyst likely to come from Thursday’s US purchasing managers’ index releases.
Silver’s latest bounce to $76.75 an ounce on Monday — a 1.33 percent gain — offered a fleeting respite from what has been a brutal stretch. The metal had just suffered a 12 percent weekly plunge, and the brief recovery was built on fragile hopes for a diplomatic breakthrough in the Iran standoff. Those hopes quickly evaporated as both Washington and Tehran hardened their demands: Trump reportedly rejected Iran’s latest overture, and Iran pushed back against calls to dismantle enrichment facilities, leaving nuclear talks deadlocked.
But the real story for silver is no longer just a geopolitical tug-of-war. The market is recalibrating around a deeper shift in its demand profile. The solar industry, long a pillar of silver’s bullish narrative, is quietly but decisively reducing its appetite for the metal. Module makers, squeezed by high silver prices, are throttling back consumption per cell through thrifting and alternative metallisation techniques. Chinese manufacturers are leading the charge: Longi Green Energy Technology plans to commercialise copper-based back-contact cells in the second quarter of 2026, while Jinko Solar is scaling up copper-based panel production and Shanghai Aiko Solar has already launched silver-free solar cells.
The numbers underscore the trend. Global photovoltaic demand for silver fell 6 percent in 2025 to 186.6 million ounces, and Metals Focus projects a further decline to around 151 million ounces in 2026 — a drop of roughly 19 percent year-on-year. That is not a normal inventory correction. It is a structural substitution, and it removes one of the most powerful growth stories that had underpinned silver’s long-term case.
Short-term, the demand vacuum is not being filled elsewhere. Even though electric vehicles, AI data centres and 5G infrastructure all require silver for its unmatched conductivity, the volume from these sectors is not yet large enough to offset the solar slump. The Silver Institute expects total industrial silver demand to contract for a second consecutive year in 2026, with the electrical and electronics category shrinking by 6 percent.
The macro environment is adding its own headwinds. Hotter-than-expected U.S. producer, import and export price data for April has reignited inflation fears, and markets have now fully priced out any Federal Reserve rate cut for 2026. Some traders are even betting on a hike by December. A stronger dollar and rising bond yields are a toxic combination for a non-yielding asset like silver. The Strait of Hormuz remains a wild card — roughly 20 percent of global oil flows through the waterway, and the International Energy Agency calls the disruption the largest in oil market history — but Citi analysts expect a resolution by the end of May. Until then, volatility stays elevated.
The supply side offers a counterweight, but only a limited one. The World Silver Survey 2026 projects a sixth consecutive annual deficit of roughly 46 million ounces, with cumulative stock withdrawals since 2021 nearing 762 million ounces. Yet supply is structurally unresponsive: around 70 percent of silver is produced as a byproduct of copper, lead and zinc mining, so mines cannot simply ramp up output when prices rise.
That supply crunch is what keeps a floor under a battered price. The gold-to-silver ratio has widened to around 59, having compressed briefly to 55 after the U.S.-China tariff truce, and the move came entirely from silver, not gold — a sign that the metal is being traded as an industrial commodity rather than a safe haven. Analyst forecasts are all comfortably above current levels: J.P. Morgan sees an average of $81 an ounce for 2026, the Reuters consensus of 30 analysts sits at $79.50, and ING at $78. The LBMA survey projects an average of $79.57, albeit with an extraordinarily wide range of $42 to $165.
The next catalyst for silver will not come from traditional precious-metal narratives. For now, the metal is caught between the supply deficit as a safety net and the twin pressures of solar substitution and a hawkish Fed. The Silver Institute notes an annualised 30-day volatility of nearly 60 percent, and that turbulence looks set to persist as long as the Iran conflict remains unresolved and the central bank refuses to signal a pivot.
Gold finds itself squeezed between two powerful forces: an aggressive Indian import tariff hike that threatens to reroute physical demand through the black market, and stubbornly high US inflation that is recalibrating Federal Reserve expectations. The combination has left bullion nursing a monthly loss of roughly 3.5%, with spot prices hovering just above key technical levels.
India stunned markets by lifting effective import duties on gold and silver from 6% to 15%, effective May 13. The move follows Prime Minister Narendra Modi’s public appeal for citizens to forgo gold purchases for a year, underscoring New Delhi’s urgency to protect foreign exchange reserves. India’s gold imports had surged 24% in the fiscal year just ended, hitting a record $71.98 billion and weighing heavily on the trade balance.
But the tariff shock is already reshaping behaviour in unexpected ways. Indian investors, rather than retreating entirely, have pivoted toward gold exchange-traded funds. Domestic ETF inflows jumped 186% in the first quarter to 20 tonnes — an all-time high, according to the World Gold Council. This suggests that while official imports may slump, the appetite for gold exposure is being channelled through financial instruments rather than physical bars.
Across the Pacific, the US inflation picture continues to darken. April’s producer price index surged 1.4% month-on-month, the steepest monthly rise since March 2022, pushing the annual rate to 6.0%. The consumer price index followed suit, climbing to 3.8% — its highest since last May. The data has upended the rate-cut narrative. Traders now price a roughly 39–40% probability of a Fed rate hike before year-end, effectively extinguishing hopes for monetary easing in 2026.
Higher real rates are anathema for a non-yielding asset like gold. The pressure is evident in the world’s largest bullion ETF, the SPDR Gold Shares. Despite a trickle of inflows in recent days, the fund has haemorrhaged approximately $4.5 billion on a year-to-date basis, with holdings shrinking by 32 tonnes. Institutional money continues to head for the exits.
Adding to the inflationary cocktail is the geopolitical factor. The blockade of the Strait of Hormuz since late February has driven Brent crude above $100 a barrel, feeding directly into the producer price data. So long as the waterway remains contested, energy costs will keep the Fed’s hawkish bias intact.
Gold itself is trading around $4,690–$4,707 an ounce, depending on the pricing venue, and sits fractionally below its 50-day moving average. The intraday trend lacks conviction — the metal is oscillating without a decisive breakout signal. Year-to-date, however, the underlying resilience is still on display: gold remains up roughly 8.4%, supported by strong physical demand.
The World Gold Council reported that total gold demand, including over-the-counter investment, reached a record 1,230.9 tonnes in the first quarter of 2026, up 2% from the prior year. That structural underpinning, driven by central bank buying and broader jewellery appetite, is the key counterweight to the macro headwinds.
Yet the Indian tariff shift carries a darker side effect. Industry players warn that the steep levy will revive smuggling, which had subsided after previous duty cuts. If a meaningful portion of official imports migrates to the grey market, the government’s fiscal and reserve goals may be partially undermined.
For now, the immediate catalyst for gold’s next directional move remains US inflation data and the evolving Fed narrative. Policymakers are in a bind: easing oil-driven supply pressure is beyond their control, and a rate hike — once unthinkable — is now being actively discussed. That dynamic, combined with India’s attempt to cap its own demand, leaves gold in a precarious position, despite the record physical backdrop.
Silver closed last week at $76.41 per ounce, nursing a near-7% weekly loss that has left traders questioning whether the metal’s long-running bull market is finally running out of steam. The selloff, however, is no simple case of profit-taking. Beneath the surface, a structural transformation in the solar industry is colliding with Federal Reserve policy and geopolitical turmoil, creating a uniquely challenging environment for the white metal.
The most consequential development for silver’s demand profile is unfolding in China’s photovoltaic sector. Longi, one of the world’s largest solar manufacturers, will begin mass production of copper-based solar modules in the second quarter of 2026. JinkoSolar is following suit, while Shanghai Aiko Solar Energy has already started producing silver-free cells with a capacity of 6.5 gigawatts.
The economics driving this shift are brutal for silver bulls. According to BloombergNEF, silver’s share of total solar module production costs has surged from 5% to 14% in just two years. That cost pressure has already triggered a 6% decline in PV industry silver demand in 2025, to roughly 187 million ounces. Analysts project a further 19% drop in 2026.
The transition isn’t seamless. Copper-based metallization increases assembly costs and raises durability concerns. TOPCon cells, which require high-temperature processing, remain particularly difficult to substitute. Still, the direction of travel is unmistakable — and it represents a permanent structural headwind for silver demand.
Despite the solar sector’s retreat, the global silver market remains in deficit for the sixth consecutive year. Total supply is expected to reach a decade-high of 1.05 billion ounces in 2026, while recycling volumes are set to climb 7%, surpassing 200 million ounces for the first time since 2012.
On the demand side, a new force is emerging. AI data centers require silver-plated copper connectors to minimize electrical resistance and prevent overheating. This growing market is partially offsetting the solar industry’s decline, though it remains too small to fully compensate.
The week’s most critical macro event arrives on April 29, when the Federal Open Market Committee concludes its two-day meeting. Markets have priced in a 99.7% probability of no rate change, according to Polymarket, and J.P. Morgan Global Research expects rates to remain steady for the remainder of 2026.
This is Jerome Powell’s final meeting as Fed chair. Kevin Warsh takes over on May 15, introducing a layer of political uncertainty that could prove decisive for precious metals. A dovish successor would provide a powerful tailwind; a hawkish appointment would extend the pain from elevated real interest rates.
The market’s focus will be on Powell’s press conference. With University of Michigan inflation expectations jumping to 4.8% in April — the largest one-month surge in a year — any hint of openness to future rate cuts could spark a sharp rally in non-yielding assets like silver. Conversely, a reaffirmation of the current hawkish stance would keep the metal under pressure.
The ongoing closure of the Strait of Hormuz is adding another layer of complexity. Oil prices are rising, and the US Consumer Price Index climbed to 3.3% in March, its highest level since May 2024. Higher inflation typically hurts non-yielding assets, but it also raises the specter of stagflation — a scenario that historically benefits precious metals.
The gold-silver ratio currently sits at approximately 60, well below the long-term average of 70, indicating that silver has significantly outperformed gold on a relative basis. Chart support lies at $72.61, with resistance at $83.75.
Institutional forecasts remain constructive despite the correction. J.P. Morgan expects an average silver price of $81 in 2026. Commerzbank is more bullish, targeting $90 by year-end and $95 by the end of 2027. Whether those targets prove achievable depends on how the Hormuz crisis, Fed policy, and Powell’s succession unfold in the coming weeks.
Thursday brings a slate of key data releases — first-quarter GDP, core PCE, and initial jobless claims — followed by the April employment report on May 2. Strong readings would further dampen rate-cut expectations, while weak numbers could reignite hopes that the Fed’s next move might be lower after all.