Silver prices tumbled on Wednesday, caught between a hawkish Federal Reserve posture and fresh military escalation in the Middle East, even as a structural supply deficit that has now reached 762 million ounces continues to underpin long-term bullish forecasts.

The white metal fell to $57.87 per ounce on July 15, a drop of 1.35 percent from the prior session, according to one widely cited quote. Other sources put the decline at 1.4 percent to $57.84, or as low as $57.55. Gold, by contrast, held nearly flat at $4,056, pushing the gold-silver ratio to 70-to-1 – a level that underscores just how badly the industrial metal has lagged its yellow counterpart this year.

Iran Strikes and Hormuz Blockade Reignite Inflation Fears

The latest leg lower followed the United States launching another wave of airstrikes against Iran and reactivating its naval blockade of Iranian ports near the Strait of Hormuz. The move, which President Trump had signalled the previous day, sent oil prices surging and revived inflation anxieties among investors. For a zero-yielding asset like silver, the combination of rising energy costs and the prospect of tighter monetary policy is doubly punishing.

The inflation picture, however, remains contradictory. US consumer prices fell 0.4 percent month-on-month in June – the first such decline since 2020 – while the annual rate slowed to 3.5 percent from 4.2 percent in May, undershooting expectations of 3.8 percent. Producer prices also dropped 0.3 percent month-on-month, the steepest slide in 14 months. Cheaper oil had been a tailwind, but the Hormuz blockade threatens to reverse that trend.

Federal Reserve Chair Kevin Warsh, testifying before Congress, reiterated the central bank’s commitment to price stability but stopped short of signalling a more restrictive stance. Markets nonetheless priced in roughly a 50 percent probability of a rate hike at the September meeting, driven primarily by the geopolitical shock to energy markets. Fed Governor Lisa Cook separately warned of inflation risks stemming from tariffs, the Middle East conflict, and heavy AI-driven investment. The Fed’s Beige Book described economic activity as growing at a slight to moderate pace in eleven of twelve districts, while noting rising input costs tied to the conflict and trade policy – conditions that keep rate-cut hopes at bay.

The Supply Squeeze That Won’t Go Away

While short-term macro headwinds dominate price action, the structural picture tells a different story. The Silver Institute projects a sixth consecutive annual supply deficit in 2026, this year of 46.3 million ounces. Since 2021, cumulative shortfalls have reached a staggering 762 million ounces. Mine production is forecast to fall by a further 2.5 million ounces, even as industrial demand – now 58 percent of total consumption – continues to climb.

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Solar manufacturers, the largest industrial consumers, have trimmed their silver usage by 19 percent to 151 million ounces this year by substituting copper. Yet the deficit has not narrowed; it continues to widen. Complicating matters further, roughly 70 percent of global silver supply emerges only as a by-product of base-metal mining, leaving producers little ability to ramp up output in response to higher prices.

Inventories on the COMEX have contracted by 75 percent from their 2020 peak, standing at just 79.9 million ounces – a telling sign of physical tightness in a market that has seen paper volumes dwarf available metal.

Analysts Stay the Course on Higher Prices

Despite the near-term rout – silver lost $16.57 per ounce, or 22.04 percent, in the second quarter, its worst quarterly performance since Q1 2020 – major banks remain resolutely bullish. JPMorgan forecasts an average price of $81 per ounce in its base case, with Bank of America eyeing $100 to $133 under a bull scenario. The LBMA consensus sits at $79.57. JPMorgan further sees prices above $80 by year-end and reaching $100 by 2030.

Paul Wong of Sprott notes that while the options market has normalised, physical inventory remains strained, and he expects supply deficits to persist for another seven to eight years, driven by demand from solar, electric vehicles, artificial intelligence, and the military sector.

Technically, support is pegged in the $57 region within a bearish rectangle pattern, with a deeper floor near $55.50 to $56.00. Resistance lies between $59.42 and $59.57. For the weeks ahead, the Strait of Hormuz will remain the critical wildcard – every fresh escalation risks lifting oil prices further, hardening the Fed’s stance, and keeping silver pinned down, even as the market’s fundamental story only grows more compelling.

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