Silver Inched Higher on PCE Relief, but a 42% Plunge from January’s $121.62 Peak and Hawkish Fed Curb Enthusiasm

Silver edged up about 1.5% on Thursday, trading near $58.31 a troy ounce, after US inflation data came in exactly as expected. The modest bounce, however, does little to erase the deep losses that have piled up since the white metal hit a record $121.62 in January. That peak now stands as a distant memory, with prices still nursing a decline of more than 40% — and the broader outlook remains clouded by a relentless Federal Reserve.

The core PCE price index, the Fed’s preferred inflation gauge, rose 3.4% year-on-year in May, matching forecasts. The headline PCE index climbed 4.1% over the same period, also in line with expectations. On a month-over-month basis, core inflation edged up 0.3%. The absence of a negative surprise gave the dollar a slight reprieve: the US Dollar Index slipped from a one-year high to around 101.30, making silver cheaper for non-dollar buyers and triggering the intraday recovery.

Yet the relief proved shallow. Hawkish rhetoric from Fed officials, including Kevin Warsh, has kept a restrictive stance firmly in place. Markets are now pricing an 88% probability of a rate hike in December, according to the CME FedWatch Tool, while a further increase is anticipated at the September 2026 meeting. Major banks have revised their forecasts aggressively: Bank of America expects three rate increases by year-end, lifting the fed funds rate to as high as 4.50%, while Deutsche Bank sees two steps. Higher interest rates raise the opportunity cost of holding non-yielding assets like silver.

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Economic data painted a mixed picture. Initial jobless claims fell to 215,000, beating the 225,000 consensus and underscoring a still-tight labor market. But durable goods orders dropped 4.5% in May, pointing to weakness in the manufacturing sector – not alarming, but offering no tailwind for industrial metals.

The structural fundamentals for silver remain bifurcated. The industrial side of the equation – demand from solar-panel manufacturers, electric-vehicle producers and artificial-intelligence infrastructure – continues to absorb physical metal at a steady clip. The Silver Institute projects a supply deficit of 46.3 million ounces in 2026, marking the sixth consecutive year of shortfall. That persistent scarcity, however, has been thoroughly overshadowed by macro headwinds. The retreat from the January record struck a 42% loss at its worst, and the metal is down roughly 13% on a year-to-date basis.

Analysts at Macquarie expect sideways trading for the remainder of the year, with a gradual decline forecast for 2027. Much will depend on upcoming inflation readings and the Fed’s response. The June Fed minutes revealed open debate on further tightening, and any upside surprise in core inflation could lock the lid back down on the silver price. The next key event on the calendar: the Fed’s September policy meeting.

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