Hopes of a breakthrough in US–Iran nuclear talks have sent silver rebounding sharply from a brutal selloff, yet the metal’s longer-term trajectory remains suspended between deepening supply deficits and a central‑bank tightening cycle that shows no sign of easing.
Futures on Friday changed hands at $67.32 per troy ounce, recovering from an intraweek crash to $63.52 — the lowest since late 2025. Thursday’s surge of more than 6% was triggered by reports that a US‑Iran agreement could be reached as early as this weekend, with President Trump stating a deal might be concluded within days. Iran’s semi‑official Fars news agency indicated Tehran would likely sign even without a finalised text, prompting a relief rally that lifted silver roughly twice as much as gold.
The magnitude of the rebound underscores just how violently the Iran conflict has disrupted the market. Two months of Strait of Hormuz closures drove energy costs sharply higher, disrupted supply chains and depressed industrial output — a headwind that directly curbs silver demand from the manufacturing sector. The same geopolitical dynamic that sent prices plunging is now fuelling the recovery: a peace signal simultaneously reignites both monetary and industrial buying.
Macroeconomic headwinds remain formidable. The European Central Bank raised its main deposit rate by 25 basis points earlier this week, the first increase in three years, lifting it to 2.25%. The move came as euro‑area inflation hit 3.2% in May, largely driven by surging energy costs. Across the Atlantic, US producer prices jumped 6.5% year‑on‑year in May — the steepest advance since November 2022 — while consumer inflation reached a three‑year high. Markets have now fully priced in a Federal Reserve rate hike by December, a stark reversal from earlier expectations of two cuts before the Iran crisis erupted.
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That rate shock has weighed heavily on non‑yielding precious metals. Silver has lost more than 23% over the past month, though it still trades about 85% above its year‑ago level. The metal touched an all‑time high of $121.62 on 29 January 2026, representing a 279% gain from the start of 2025. The sharp monthly slide has been driven by repricing of monetary policy expectations as much as by the disruption to industrial supply chains.
Yet beneath the volatility, a structural supply deficit continues to tighten its grip. The market is heading into its fifth consecutive deficit year, with a cumulative shortfall of 820 million ounces forecast through 2026. Annual mine output is essentially flat at roughly 813 million ounces, and because most silver is produced as a by‑product of copper and zinc mining, production cannot be quickly ramped up to close the gap. The Silver Institute projects a sixth straight shortfall in 2026, estimated at 46.3 million ounces.
This persistent undersupply has provided a floor under prices even as rate expectations batter sentiment. The next major catalyst arrives within days, when Fed Chair Jerome Powell holds his press conference. If the central bank holds rates at 3.50–3.75% as expected, all attention will shift to his tone on the autumn outlook. A dovish signal could reignite bullish momentum; any hawkish surprise would add to the headwinds already facing the metal.
A reopening of the Strait of Hormuz would relieve immense pressure on the manufacturing sector and rapidly boost industrial demand for silver. But whether the nascent deal holds could become clear as early as this weekend, according to Trump. For now, the market is caught between the short‑term relief of a diplomatic breakthrough and the longer‑term weight of a tightening cycle that has only just begun.
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