Silver finished Friday at $59.69 per ounce, clawing back 3.15% after softer-than-expected US inflation data. The respite, however, does little to mask a brutal month: the metal has shed more than 20% in value over the past four weeks and now sits roughly 51% below its 52-week high of $121.78 reached in January.
The rally on Friday was sparked by the May PCE index, which rose 0.4% month-on-month, marginally below the 0.5% economists had penciled in. That gave risk assets a brief reprieve, but the structural headwinds remain firmly in place.
Rate Expectations Hold the Reins
Monetary policy continues to dictate silver’s trajectory. Inflation hit 4.2% in May, pushing Fed officials to openly debate additional tightening in the second half of 2026. Nine of eighteen Fed members now anticipate at least one more rate hike this year, and the central bank has revised its PCE inflation forecast for 2026 upward to 3.6%. The CME FedWatch Tool assigns a 61% probability to a September move, while separate market pricing suggests the odds are as high as 62%. The Deutsche Bank goes further, expecting two rate increases — in September and December.
For a zero-yielding asset like silver, rising rates are toxic. A stronger dollar further squeezes international buyers, who must pay more for the same ounce of metal.
Supply Deficit Deepens — But Offers No Floor
On the physical side, the story is starkly different. The Silver Institute projects 2026 will mark the sixth consecutive year of supply shortfalls, with the deficit widening 15% to 46.3 million ounces. COMEX inventories have plunged from 531 million ounces in October 2025 to around 315 million ounces currently. Industrial demand — every solar panel and electric vehicle consumes silver irreversibly — continues to drain stockpiles.
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Yet supply is largely inelastic to price changes. Most silver is produced as a by-product of copper and zinc mining, so even a sharp drop in the silver price does not reduce output. The mines keep running because the base metal covers the costs.
Demand-side uncertainty adds another layer. While global solar installations are booming, material savings and substitution — potentially shifting to copper — could curb silver consumption per module, undercutting one of the key bullish narratives.
Diverging Bank Forecasts Reflect the Tension
The clash between macro fear and physical scarcity has produced wildly divergent outlooks from major institutions. J.P. Morgan expects silver to average $81 an ounce this year, relying on the deficit story. TD Securities, by contrast, forecasts a drop to $44, a scenario that assumes a severe economic downturn.
Technical Levels Offer a Potential Floor
The price hit a local low of $55.62 last week. Support sits at $56.82 and then $55.29, while resistance stands at $61.02, followed by $71.80. The relative strength index at 34.3 is approaching oversold territory, and the seasonally weak June period may be giving way. A counter-move toward the $70 area is considered plausible. If the $55.29 support fails, the next correction target comes into view at the $50 breakout level. The 50-day moving average at $73.48 remains distant.
What to Watch This Week
Wednesday brings a speech by Fed Chair Kevin Warsh in Portugal, where he is expected to discuss the European economic backdrop. On Thursday, the Bureau of Labor Statistics releases the June jobs report, with analysts forecasting 172,000 new positions. A stronger-than-expected print would likely add to downward pressure on silver, reinforcing the Fed’s hawkish stance and deepening the metal’s disconnect between a record supply deficit and a market dominated by rate anxiety.
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