Last week witnessed the most extreme price swings seen in the silver market this year. A dramatic mid-week collapse was followed by a significant recovery on Friday, driven by a single economic report from the United States.
Friday’s Jobs Data Shifts the Fed Calculus
The catalyst for the late-week rebound was a disappointing U.S. employment report. Data showed Non-Farm Payrolls declining by 92,000 positions while the unemployment rate climbed to 4.4%. This immediately altered market expectations for the Federal Reserve’s monetary policy. Where investors had previously priced in an initial interest rate cut for July, the consensus swiftly shifted toward September or October. For a non-yielding asset like silver, lower interest rates reduce its opportunity cost, making it more attractive to hold.
By Friday’s close, the spot price was recorded at $83.48 per ounce. Despite the rally, silver still posted a weekly loss, a testament to the severe turbulence that preceded it.
Mid-Week Plunge Triggered by Geopolitical Escalation
The earlier volatility was sparked by a sharp escalation in tensions involving the U.S., Israel, and Iran. On Tuesday, silver plunged to $83.70 per ounce. This represented a staggering fall from a peak above $96 earlier in the week—a level not seen since late January. In essence, approximately 12% of the metal’s value was erased within a 48-hour window.
The sell-off occurred as a U.S.-Israeli offensive entered its seventh day and Tehran launched new missile and drone attacks in the Gulf region. The strategic Strait of Hormus was closed, sending oil prices soaring and stoking fears of renewed inflation. This situation highlighted silver’s dual nature: as a safe-haven asset, it typically benefits from wartime anxiety, but as a key industrial metal, it suffers from recessionary concerns—a contradiction that pure monetary metals like gold do not face.
Additional pressure came from U.S. Treasury Secretary Scott Bessent, who announced that a global 15% tariff would soon be implemented.
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A Persistent Structural Deficit Underpins the Market
Beyond the short-term volatility, fundamental factors continue to provide underlying support. The Silver Institute forecasts 2026 will be the sixth consecutive year of market deficit. Global demand is expected to remain broadly stable, while supply is projected to grow by only 1.5%. The resulting shortfall of 67 million ounces must be filled by drawing down above-ground inventories, yet physical stockpiles in London are already reported as tight.
Industrial demand remains a pillar of strength. The photovoltaic industry alone consumes over 230 million ounces annually. The electrification of transport requires between 25 and 50 grams of silver per electric vehicle. Globally, exchange-traded product holdings currently stand at approximately 1.31 billion ounces.
Divergent Views from the Analyst Community
Institutional price forecasts present a picture of stark disagreement. J.P. Morgan Global Research projects an average silver price of $81 for 2026—more than double its 2025 forecast. In contrast, Bank of America’s head of metals strategy, Michael Widmer, maintains his exceptionally bullish outlook of $309 per ounce.
A potential market catalyst looms: should proposed tariffs on metal imports be enacted, trading activity could shift back to New York. This move could further tighten physical liquidity outside the United States.
The coming weeks will likely reveal which force proves dominant: the combination of geopolitical uncertainty and hopes for Fed easing, or the structural undersupply in the physical market. With an annualized volatility exceeding 122%, silver remains a plaything for competing macroeconomic and geopolitical currents.
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