Silver’s Constellation of Risks: From India’s Import Levy to a Deepening Deficit and a Hawkish Fed Pivot
Published on 05/14/2026 at 14:32 | Redaktion boerse-global.de
Silver’s ability to hold above $87 an ounce this week masks a tug-of-war between forces that would normally send the metal in opposite directions. A parabolic surge on Monday — the biggest single-day gain in months at 7% — evaporated after a punishing US inflation print and a surprise import tax from India, yet the price has refused to break down. The reason lies in a supply deficit that is only widening.
The White House and Beijing are haggling over tariff relief on roughly $30 billion of goods at a summit in Peking, a deal that could supercharge industrial demand for silver. Nearly 60% of annual consumption comes from factories, and the solar-photovoltaic sector alone accounts for about one-third of that industrial appetite. Any easing in trade tensions would directly unclog supply chains for solar modules and electronics, adding to an already insatiable demand picture.
But the market’s immediate headache is a U-turn in Federal Reserve expectations. US producer prices jumped 1.4% in April, fuelled by a surge in gasoline costs linked to the Iran conflict, while consumer inflation clocked in at 3.8% — both above consensus. Traders have nearly fully priced out rate cuts for this year and now see a greater than 70% probability of a hike by April 2027. That kind of monetary tightening is a heavy weight on zero-yielding precious metals.
The six-day winning streak that had carried silver higher snapped as a result. By Thursday the spot price was hovering near $87, down from the $89 area where it had stabilised earlier in the week after a 7% rally on Monday briefly revived bullish momentum. The metal is still up over 22% year to date, but some analysts warn that the run has left it looking expensive.
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HSBC raised its 2026 price forecast to $75 but still rates silver as overvalued at current levels, seeing limited upside from here. The big test will come with the US retail sales report for April, due shortly; a weak number could temper rate fears and give bullion a fresh bid.
On the supply side, the structural deficit continues to deepen. The Silver Institute projects the sixth consecutive annual shortfall in 2026, with the gap expected to reach roughly 46 million ounces — a 15% increase from the prior year. Since 2021, over 760 million ounces have been drained from above-ground inventories, driven by solar manufacturers, electric-vehicle producers and the build-out of AI data centres.
India has thrown a new wrench into the equation. The government raised the effective import duty on silver to 15% as of Wednesday, a move aimed at cooling record domestic demand, protecting the trade balance and shoring up the rupee. Industry estimates suggest Indian silver imports could slump by as much as 20% in the near term, removing a key source of global buying.
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That demand shock is being offset, however, by persistent macroeconomic tailwinds. Inflation is on the rise across developed economies: Germany reported 2.9% in April, its highest since early 2024, while the US print of 3.8% is stoking haven buying. The energy component is the culprit — the ongoing conflict in the Middle East has choked the Strait of Hormuz, starving the world of millions of barrels of oil a day. Brent crude recently climbed to nearly $107, pushing transport costs higher and fanning inflation.
The net effect is that silver’s floor remains well anchored. The nominal all-time high of $121 touched in January still stands as the next major target for bulls, and as long as the supply deficit persists, any pullback is likely to attract buyers. The next catalysts are clear: the outcome of the Trump-Xi talks for medium-term industrial demand, and the retail-sales data for near-term direction.
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