Silver's Demand Paralysis: Solar Exodus and Fed Inaction Test the Bull Case

The silver market is caught between two powerful opposing forces—an increasingly hawkish Federal Reserve and a structural shift away from its largest industrial consumer—leaving prices stuck near $76 and the bull case hanging by a thread. The white metal closed Friday at $75.83 per ounce, down 0.50% on the day and virtually flat on the week with a 0.49% decline.

The macro headwind is unmistakable. The US PCE price index, the Fed’s preferred inflation gauge, accelerated to 3.8% in April—the sharpest reading in three years. With the probability of a June rate cut now below 8%, according to the CME FedWatch Tool, market participants have priced in zero cuts for 2026. The ten-year US Treasury yield sits at 4.56%, making non-yielding silver a tough hold. The next key test arrives with the FOMC meeting on June 16–17, and a hawkish dot plot could extend the consolidation well into the third quarter.

Yet the most corrosive pressure on silver’s demand profile comes from an unexpected source: the solar industry. Once the fastest-growing driver of industrial silver consumption, photovoltaic manufacturers are now racing to replace the metal with copper. Longi Green Energy will begin mass-producing back-contact cells using copper instead of silver from the second quarter. Jinko Solar is scaling up copper-based panel production, and Shanghai Aiko Solar has already launched silver-free cells. The cost impetus is clear: silver accounted for roughly 3% of module costs in 2023; today that share has ballooned to between 17% and 29%. As a result, silver consumption in the PV sector fell 6% to 186.6 million ounces in 2025 and is expected to drop another 19% to around 151 million ounces in 2026.

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The implications for the supply-demand balance are dramatic. UBS has slashed its 2026 deficit forecast by 80%, from 300 million ounces down to 60–70 million. The bank’s price targets followed suit: Q2 forecast cut from $100 to $85, September from $95 to $85, year-end at $80, and March 2027 at just $75. Other banks are less pessimistic but still divergent. Citigroup sees silver at $110 in the second half, Bank of America expects a 2026 average of $85.93, and JPMorgan forecasts $81.

Despite the demand headwinds, the market is not in surplus. The Silver Institute projects a sixth consecutive annual deficit of roughly 46 million ounces, adding to a cumulative stock drawdown of nearly 762 million ounces since 2021. Because around 70% of silver output is a byproduct of base-metal mining, supply cannot respond quickly to price signals. This structural deficit acts as a floor under prices.

That floor is currently being tested on both sides. Institutional investors have been pulling back: physically backed silver ETFs saw outflows of about 67 million ounces, reducing holdings to roughly 794 million ounces. Geopolitical developments offered a brief stabilizing effect—reports of a possible 60-day extension of the US-Iran ceasefire provided some support Friday but failed to reverse the broader downtrend.

Technically, silver is trading just below its 50-day moving average at $76.09. The $76 level serves as immediate resistance; a clean break above it could open the path toward $80. On the downside, the $73.60 zone is critical support—if it gives way, follow-through selling toward the $70–$72 range is likely. The week ahead will be shaped by US non-farm payrolls data; a strong print would reinforce the Fed’s restrictive posture and pile more pressure on silver. The May CPI release on June 10 and the FOMC decision on June 16–17 will provide the next major catalysts. Until the inflation picture softens convincingly, silver lacks the fuel for a sustained rally—even as its supply deficit refuses to go away.

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