Silver is weathering a storm that its own supply deficit cannot calm. The metal traded below $58 an ounce on Wednesday, its weakest in seven months, despite notching a sixth consecutive year of structural shortage. The gap, initially estimated at 67 million ounces, has since shrunk to 46.3 million, but that shrinking cushion has offered no protection against a brutal sell-off.
The immediate trigger is a Federal Reserve that refuses to blink. A fresh JOLTS report showed US job openings at a two-year high, and analysts expect June wages to accelerate. Core inflation remains stubbornly above the central bank’s 2% target, reinforcing bets on at least one more rate hike this year — possibly as soon as September. Fed Chair Kevin Warsh has amplified the hawkish tone by advocating a reduction in the balance sheet, reversing earlier expectations for late 2025. Higher real yields and a climbing greenback are punishing any asset that doesn’t pay interest, and silver is squarely in the crosshairs.
Compounding the macro headwind is a marked slowdown in industrial demand, the metal’s bedrock. The solar photovoltaic sector, a voracious consumer, could see its purchases drop by 19% as manufacturers economise or switch to substitutes. Jewellery buyers are also retreating, with a 16% decline expected. Overall industrial consumption is forecast to slip 3% to 640 million ounces. High-tech areas such as electronics and medical devices continue to use silver, but they cannot offset the broader retreat.
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Geopolitical tension has added another layer of uncertainty. Markets had clung to hopes that US-Iran talks in Qatar could yield a ceasefire in the Middle East, but Tehran poured cold water on those expectations, denying the reports of diplomatic meetings in Doha and refusing direct talks with American officials. The lack of progress rattled Asian trading desks, and in India the spot price fell 50 rupees, sliding back below the 2,400-rupee psychological threshold as traders booked profits from a brief bounce.
The macro backdrop is darkening on a global scale. The World Bank projects world economic growth of just 2.5% in 2026 in its base scenario, with a gloomier path that could knock the figure to 1.3%. A weaker economy would further sap industrial appetite for silver. Unlike gold, which enjoys steady central-bank buying during dips, silver must rely on fresh investment capital to recover. Without that inflow, the deficit — even if it narrows — remains an academic point.
Attention now turns to the upcoming US nonfarm payrolls report and further speeches by Warsh. A robust labour reading would likely send the white metal spiralling towards fresh lows for the year, confirming that in the current environment, a supply shortfall alone is no match for rate anxiety and cooling industry demand.
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