Silver has developed a peculiar immunity to conflict. While geopolitical tremors normally send precious metals soaring, the white metal slid 1.4% to $64.48 an ounce in early Wednesday trading—despite fresh US strikes on Iranian targets and President Trump’s claim that Tehran shot down an American helicopter in the Strait of Hormuz. The macro calculus is simply overwhelming the crisis impulse.
The culprit is crude. Brent crude traded at $91.36 a barrel and WTI at $88.10 on Wednesday morning, with US blockades of Iranian ports and the near-total shutdown of the Strait of Hormuz fuelling the rally. Expensive energy reignites inflation fears, and markets now price in a more than 70% probability that the Federal Reserve will raise interest rates by December. Under Fed chief Kevin Warsh, the tightening bias looks entrenched. Higher rates hammer non-yielding assets like silver, while a strengthening dollar adds another headwind for international buyers.
All eyes are on the May consumer price index, due at 12:30 GMT. Economists expect a 4.2% year-over-year rise, accelerating from 3.8% in April and marking the highest reading in three years. The national average gasoline price surged 8.8% to $4.60 a gallon in May, a direct feed into the inflation pipeline. Should the CPI print hot, silver’s next stop could be $61—and chart technicians warn that a break below that level opens the door to $55.
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Yet the paper-market rout masks a fundamentally different reality in the physical world. The Silver Institute reported a fifth consecutive supply deficit in 2025, with total demand reaching 1.13 billion ounces. Mining output rose 3% to 846.6 million ounces, but that was insufficient to bridge the gap. For 2026, the institute forecasts a structural deficit of 46.3 million ounces—the sixth in a row. Industrial consumption, after four years of growth, slipped 3% last year, dragged down by lower silver use in photovoltaics. Demand from AI infrastructure, automotive electronics and power grids, however, remained robust.
The divergence between paper and physical markets is starkest in China. Importers there are paying premiums of roughly 10% over the spot price, and Chinese silver imports hit an eight-year high earlier in 2026. Domestic retail investors are fleeing the weakening yuan into physical bullion, creating a parallel market that has decoupled from Western futures.
From its all-time high of $121 in January, silver has shed nearly half its value. The current support zone around $64 is being tested, and a decisive break could accelerate losses. On the upside, the psychologically important $70 level stands as a formidable barrier—only a sustained reclaim would signal a reversal of the downtrend. But as long as oil keeps stoking inflation expectations and the Fed keeps its hawkish stance, the macro headwinds will keep the upper hand, no matter how tight the physical market becomes.
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