Silver Rallies on Softer US Inflation Data, Defying ETF Outflows and Geopolitical Risks
Published on 07/14/2026 at 20:53 | Redaktion boerse-global.de
Silver prices surged on July 14 after the June US consumer price index rose by just 3.5% year-on-year, well shy of the 3.8% economists had penciled in. On a monthly basis, prices actually declined by 0.4% — the first such drop since 2020. Core inflation eased to 2.6% from 2.9%, driven largely by a 9.7% plunge in gasoline costs. The immediate reaction in the futures market was pronounced: the implied probability of a July rate hike by the Federal Reserve collapsed from roughly 40% to around 16%, removing a major headwind for non-yielding precious metals.
Yet the brightening inflation picture played out against a backdrop of persistent bearish flows in the physical exchange-traded fund market. The iShares Silver Trust, the world's largest silver ETF, shed 17 tonnes of metal on July 13 — its fourth consecutive daily reduction — bringing total holdings to approximately 14,850 tonnes. The SPDR Gold Trust also offloaded more than three tonnes of gold, leaving its stash at about 1,002 tonnes. The selling suggests that at least some institutional investors remain wary despite the disinflation signal.
That caution is understandable given the escalating crisis in the Middle East. The United States launched a fresh wave of airstrikes against Iran on July 14, and President Trump reimposed a naval blockade on the Strait of Hormuz, coupled with a 20% compensatory fee on freight passing through the waterway. Iran retaliated by attacking two tankers belonging to the United Arab Emirates, reportedly killing an Indian seaman and injuring eight others. The uncertainty has pushed oil prices higher and lifted bond yields, both of which tend to weigh on silver as a zero-yielding asset.
Underneath the daily price swings, the structural case for silver remains a study in contradictions. The World Silver Survey projects a sixth consecutive annual supply deficit in 2026, this time to the tune of 46.3 million ounces, bringing the cumulative shortfall since 2021 to 762 million ounces. COMEX registered inventories have shrunk 75% from their 2020 peaks to 79.9 million ounces. However, separate calculations point to a larger deficit of 73 million ounces this year, narrowing from 143 million in 2025 and forecast to shrink further to just 25 million ounces by 2027 as industrial demand softens.
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The demand picture is indeed shifting. India, traditionally a massive consumer of physical silver, slammed the brakes on imports after raising duties on both gold and silver from 6% to 15% last May. Inbound shipments collapsed from a peak of 1,500 tonnes in October 2025 to just 47 tonnes in May 2026 — the lowest since July 2023. Domestic premiums consequently rocketed from $0.10 per ounce in early June to $6.30 by early July, and dealers expect them to climb further during the upcoming wedding season.
On the industrial front, the solar sector — which accounted for a significant slice of recent demand growth — is showing signs of a technology-driven shift. LONGi Green Energy has started a 21 GW production line in Shaanxi province that uses copper-based metallization for rear-contact solar cells instead of silver, potentially slashing silver consumption per watt by 70% to 90%. If the process spreads to a fifth to a third of new capacity, annual silver demand from the solar industry could drop by hundreds of millions of ounces. Already, 2026 solar-related silver offtake is expected to fall 19% to 151 million ounces, though this is being partly offset by emerging demand from AI data centers, electric vehicles, and 5G infrastructure.
Analyst forecasts reflect the growing ambiguity. UBS expects silver to average $85 per ounce in the second and third quarters of 2026, slipping to $80 by year-end and $75 in the first quarter of 2027. HSBC is more cautious, pencilling in an average of $75 for 2026 and $70 by year-end, with a further slide to a $65 average in 2027. Saxo Bank argues that a fresh catalyst is needed to restart the rally, while BNP Paribas counters that structural drivers — central bank purchases, dedollarization, and industrial demand — remain intact over the medium to long term.
The gold-to-silver ratio, a common valuation gauge, has widened to 69.4 after dipping below 55 in May. That is well above the historical normal range of 15–20, suggesting silver may be undervalued relative to gold, but the ratio itself offers little directional clarity in the current environment.
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On the supply side, there are nascent signs of relief. Silver Mountain Resources is poised to restart the idled Reliquias mine in Peru during the third quarter of 2026; the processing plant, with daily capacity of 2,600 tonnes, is already 95% complete. Meanwhile, the Perth Mint reported a 19% monthly drop in silver sales in June and a 37% year-on-year decline, signaling weak retail appetite.
Silver’s immediate trajectory likely hinges on two unknowns: whether the Federal Reserve’s next move aligns with the dovish inflation read, and whether the Strait of Hormuz crisis escalates further. A sustained break above recent consolidation levels would require both easing monetary policy and a de-escalation of geopolitical risk — a combination that remains elusive for now.
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