Silver has largely shrugged off the macroeconomic headwinds that normally cap precious metals, with the white metal extending its rally for a sixth straight session to hit around $86.80 an ounce during Asian trading. The move comes despite the dollar strengthening and the latest U.S. inflation print coming in hotter than expected.
Consumer prices in April rose 3.8%, above the 3.7% consensus estimate and the highest since May 2023. That effectively pushes rate cuts further into the future, with markets now pricing in a more than 70% probability of a rate hike by April 2027. Such a backdrop typically crushes silver, but the metal has found support from an unlikely pair of catalysts: a deepening physical shortage and a surge in industrial demand optimism tied to U.S.-China trade talks.
The industrial angle has taken center stage after President Donald Trump’s visit to Beijing from May 13 to 15, the first presidential trip to China in nearly a decade. With roughly 60% of silver demand tied to factories, solar panels, electric vehicles, and electronics, the rally stood in sharp contrast to gold’s modest 0.39% advance on Monday. The gold-silver ratio reflected the divergence — falling to 55.46 as silver outperformed, after sitting above 61 just six weeks earlier. The market is betting that the two largest economies can extend the current tariff pause or adopt the Board-of-Trade framework, which includes $30 billion in committed U.S. product purchases and tariff reductions in non-strategic sectors.
That optimism is layered on top of a structural supply squeeze. The Silver Institute projects a sixth consecutive annual deficit in 2026, with a shortage of 67 million ounces, widening from last year’s 40 million ounce gap. J.P. Morgan Global Research notes that silver prices surged more than 130% in 2025 alone, driven by record industrial consumption and persistent deficits. The supply side, however, is tricky to fix: approximately 70% of global silver output comes as a byproduct of copper, zinc, and lead mining, meaning higher silver prices don’t automatically unlock new production.
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The physical tightness is also being weighed against a gradual decline in one key industrial segment. According to Metals Focus, photovoltaic demand for silver dipped notably last year, and experts expect a further drop in 2026 to around 151 million ounces as solar manufacturers reduce silver usage per cell. That moderation, however, has not yet dented the overall deficit picture.
On the macro front, the rally is walking a tightrope. Geopolitical risks, particularly the ongoing tensions at the Strait of Hormuz, threaten oil supplies and keep inflation fears simmering. Higher crude prices would add further pressure to the Fed’s policy stance, potentially strengthening the dollar and capping silver’s gains. Analysts acknowledge the wide dispersion of possible outcomes. TD Securities sees an average of $44 per ounce for this year, while J.P. Morgan forecasts $81 and UBS projects a peak near $100. The decisive factor may be whether industrial tailwinds or inflation headwinds prevail — and the outcome of the Beijing talks could tip the scale.
As of May 13, silver was trading near $87.43, still well below its nominal all-time high of $121.64 from January. The next test will be whether the industrial premium can hold once the trade summit dust settles.
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