Even as the Silver Institute forecasts a sixth consecutive supply shortfall in 2026 — with a deficit of 67 million ounces — the metal is being pummelled by forces that no production gap can offset. The price has lost more than 20% in recent weeks, tumbling below $57 on Thursday and extending the rout on Friday to a low of $55.60. A late-session recovery to just over $58 offered only a fleeting reprieve; the broader downtrend remains firmly entrenched.
The Federal Reserve is the primary culprit. Under new chairman Kevin Warsh, the central bank has doubled down on its hawkish stance, with Bank of America analysts now expecting three more rate hikes this year that would lift the federal funds rate by 75 basis points to 4.50%. The US dollar has responded by punching above 101 on the dollar index and hitting a one-year high, making silver more expensive for overseas buyers. With US inflation running at 4.2% in May, traders are bracing for another increase in September, further draining the appeal of a zero-yielding asset.
Geopolitical relief has stripped away another layer of support. The interim peace deal signed in mid-June between the US and Iran — the Islamabad Memorandum — has calmed tensions in the Strait of Hormuz, with shipping volumes nearly back to pre-crisis levels. The risk premium that had been baked into commodity markets is rapidly evaporating, prompting speculative funds to unwind their silver hedges.
On the industrial side, the picture is equally troubling. The solar power sector, a key driver of silver demand in recent years, is cutting back sharply. Photovoltaic manufacturers — stung by historically high procurement costs — are substituting alternative materials and reducing the silver content in their panels. The Silver Institute estimates that solar demand will drop 19% this year to 151 million ounces. Jewelry and silverware orders are also slumping, compounding the demand-side weakness.
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A simultaneous sell-off in US technology stocks added to the pressure, forcing leveraged investors to liquidate silver positions to meet margin calls. The result is a market that has been drained of both safe-haven and speculative bids.
Technical indicators underscore the severity of the decline. The Relative Strength Index has dropped to 27.5, signalling an oversold condition by conventional measures, but chartists see little room for a sustained bounce. The price has already undercut the next support level at $54.56, and if that line fails to hold, further losses are likely. Resistance now sits in the $58 area, a zone that silver struggled to reclaim on Friday.
Longer-term bulls point to the structural deficit and the fact that global inventories have shrunk by more than 760 million ounces since 2021. But with the Fed remaining resolute, the dollar strong, and industrial demand — particularly from solar — on the wane, the bears have the upper hand for now. A meaningful turnaround will require either a shift in monetary policy or a fresh catalyst from the industrial side of the equation.
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