For six straight years, the silver market has consumed more metal than miners have pulled from the ground. That persistent scarcity should, by any textbook logic, keep prices elevated. Yet the white metal is trading around $63.95 per ounce — down 26% from a month ago — as two powerful forces eclipse the bulls’ favourite argument: a solar industry in retreat and a Federal Reserve that refuses to blink.
The immediate price action offered a fleeting moment of optimism. On Thursday, silver tumbled to an 11-week low of $61.50 before staging a sharp reversal. By early afternoon the spot price had recovered to $63.61, a modest daily gain. The bounce came despite a barrage of headwinds: hotter-than-expected US inflation data, the European Central Bank’s first rate hike in three years, and escalating military conflict in the Middle East. Market observers interpreted the resilience as a sign that much of the bad news had already been priced in.
The macroeconomic picture remains daunting. US producer prices surged 6.5% in May, while the consumer price index climbed 4.2% year-on-year — the highest reading since April 2023. Energy costs accounted for more than 60% of the monthly CPI increase, driven largely by the near-total closure of the Strait of Hormuz after a second consecutive day of US airstrikes on Iranian targets. The resulting oil rally is feeding inflation, which in turn pressures the Fed to tighten policy. Markets now fully price in a 25-basis-point rate hike by December, according to the CME FedWatch Tool. Higher rates are anathema to zero-yield assets like silver, and the metal’s recent dip to $61.50 reflects that dynamic clearly.
Geopolitical risk cuts both ways. While the closure of Hormuz and the renewed US-Iran hostilities stoke inflation fears that weigh on silver, the underlying energy shock also complicates the Fed’s calculus. Higher oil prices could prolong inflation, muddying the outlook for rate cuts. Yet diplomatic channels remain open, with CNN reporting that behind-the-scenes negotiations are continuing. That faint hope of a ceasefire is lending some stability to markets, but it has done little to reverse silver’s broader slide.
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The real game-changer, however, is coming from an unexpected corner of the economy. For years, the solar photovoltaic industry was silver’s most reliable demand driver. That relationship is fracturing. In 2025, PV-related silver consumption fell 6% to 186.6 million ounces, and Metals Focus projects a further 19% decline in 2026 to roughly 151 million ounces. The reason is simple arithmetic: silver accounts for up to 29% of module costs. When the price topped $80 an ounce, manufacturers accelerated the search for substitutes. Longi Green Energy plans to replace silver with copper in mass production starting in the second quarter of 2026. Jinko Solar is preparing copper-based modules, and Shanghai Aiko Solar already offers silver-free cells. Overall industrial demand slipped 3% to 657.4 million ounces last year — the first decline since the pandemic.
This demand shift is all the more striking because the physical market is screaming scarcity. The Silver Institute forecasts a sixth consecutive deficit in 2026, with a shortfall of 46.3 million ounces. Since 2021, cumulative inventory withdrawals have reached nearly 762 million ounces. COMEX warehouse stocks have plummeted to around 315 million ounces from 531 million ounces in October 2025. China is compounding the supply squeeze by tightening export controls on silver from 2026, requiring state licences that effectively lock out smaller exporters.
Yet the structural deficit has failed to lift prices. Analyst forecasts reflect the deep uncertainty plaguing the market. The LBMA consensus for 2026 sits at $79.57 per ounce, but the range is extraordinarily wide — from $42 to $165 — underscoring how far scenarios diverge. The near-term catalyst will be the Fed’s next meeting on June 17. Without a clear signal of monetary easing, the supply deficit may serve only to stabilise prices, not propel them higher. For a genuine rally to take hold, the market needs fresh impetus from inflation, the dollar, or industrial demand — and at the moment, none of those pillars is providing support.
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