Silver is staging a comeback, notching its third consecutive weekly gain to trade near $76 an ounce. This recovery from an October low follows a dramatic plunge from January’s record peak of $120, underscoring the metal’s notorious volatility as it straddles the roles of industrial commodity and haven asset. The immediate fate of this rally, however, rests on the precarious state of US-Iran diplomacy and a confounding economic picture.
The diplomatic ceasefire agreed on April 8, which initially calmed oil prices and inflation fears, is showing strain. Israeli attacks in Lebanon and ongoing disruptions in the Strait of Hormuz are testing the agreement as talks continue in Islamabad under Vice President JD Vance. Since the conflict began on February 28, silver had fallen nearly 20%, crushed by oil-driven inflation fears. Its recent bounce reflects fragile hopes that diplomacy can ease energy price pressures.
Paradoxically, the very inflation that hurt silver is now supporting it. The latest US inflation rate jumped to 3.3% in March, the highest level since May 2024, driven by soaring energy costs including gasoline and heating oil. While high inflation boosts silver’s appeal as a store of value, it also constrains the Federal Reserve. Markets now see only a 30% chance of at least one rate cut by December. The Fed has held its benchmark rate steady at 3.5-3.75%, with markets pricing in just one cut for all of 2026 and expecting no action at the upcoming FOMC meeting on April 28-29.
Despite this, some Fed officials signaled in March minutes that cuts could still come this year. Bank of America maintains its forecast for two Fed moves in 2026, citing limited wage pressure and the central bank’s dovish stance toward supply-driven inflation. A weaker US dollar has provided an additional tailwind for dollar-priced silver.
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Beyond the headlines, a severe structural supply deficit underpins the market. Demand exceeded mine supply in 2025 by an estimated 160 to 200 million ounces. The photovoltaic industry alone consumes over 230 million ounces annually. The market is facing its fifth consecutive annual deficit, with a cumulative supply shortfall of 820 million ounces projected between 2021 and 2026.
New risks are emerging on the supply side. The US initiated trade investigations against Mexico in March, which produces roughly a quarter of global mine supply. Major producer Fresnillo PLC, operating exclusively in Mexico, has already cut its 2026 production guidance by 9%, while First Majestic Silver revised its own target down by 11%. The comment period for this trade investigation closes on April 15. China’s two-year export restrictions on silver further tighten global availability.
With the metal trading about 35% below its January high, analyst year-end targets reveal wide dispersion. Deutsche Bank expects $100 an ounce, Commerzbank targets $90, and UBS projects an average of $85. Whether silver can sustain its climb toward any of these levels will be decided in the coming days, as diplomats in Islamabad work to salvage a truce that silver traders are watching just as closely as any economic report.
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