Silver's Rally Unravels as Iran Thaw and Aggressive Fed Path Crush Safe-Haven Appeal
26.06.2026 - 17:25:56 | boerse-global.de
Silver has suffered a brutal reversal since January’s record highs, shedding nearly half its value in a selloff that accelerated last week with a 10% decline. The white metal is caught in a perfect storm: a hawkish Federal Reserve, a diplomatic thaw in the Middle East, and deteriorating industrial demand are overpowering what remains a structurally tight supply picture. Even a brief bounce on Thursday, triggered by a softer dollar and falling Treasury yields, could not halt the slide.
Fresh inflation data did little to stem the bleeding. The US PCE price index rose to 4.1% year-on-year in May—the highest reading since April 2023—while the core measure climbed to 3.4%, a three-year peak. Both remain far above the Fed’s 2% target. Headline inflation, as measured by other benchmarks, stood at 4.2% in May, reinforcing the central bank’s resolve. Fed Chair Kevin Warsh has made clear he will not bow to political pressure, keeping rates restrictive until price stability is restored. The market now prices in three rate hikes for 2026, with the probability of a first move in September at 63% according to CME FedWatch, down from 68% just before the PCE release. Bank of America issued its most aggressive forecast yet: three quarter-point hikes in September, October, and December, lifting the federal funds rate to 4.25–4.50%. Deutsche Bank expects two. The US Dollar Index surged to a 13-month high, a toxic backdrop for zero-yielding precious metals.
Compounding the pressure, geopolitical tensions have eased dramatically. In mid-June, the US and Iran concluded a provisional peace agreement, calming the Strait of Hormuz and allowing shipping traffic to recover to near pre-crisis levels. The risk premium that had propped up silver prices quickly evaporated as speculators unwound hedges. The dollar’s strength only added to the headwind, making the metal more expensive for non-US buyers.
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Industrial demand, a key pillar for silver given its use in electronics, solar panels, and chip manufacturing, is faltering. The solar sector, a major consumer, slashed orders by 19% compared with the prior period. Jewelry and silverware demand has also collapsed. This cyclical weakness is weighing more heavily on prices than the physical supply deficit. The Silver Institute projects a sixth consecutive annual shortfall in 2026 of roughly 46 million ounces, and global inventories have shrunk by more than 760 million ounces since 2021. AI-driven infrastructure continues to absorb silver for semiconductor production, but that support has been insufficient to counter the broader demand slide.
The divergence between the two precious metals has become stark. The gold-silver ratio closed the week at 69.3:1, widening from around 62 in just eight trading days—near the highest since the peak of the Iran conflict. Silver’s dual role as both a monetary and an industrial metal means it is hit harder when risk appetite fades and growth concerns mount. On a technical basis, the Relative Strength Index has fallen to 27.5, signaling deeply oversold conditions. Yet the downtrend remains intact. The price briefly dipped below $55.60 per ounce on Friday, with the next key support at $54.56. Resistance lies at $58.
Looking ahead, all eyes are on the June PCE report due July 30—the first data release to capture oil prices following the Iran cease-fire. If the reading comes in more deflationary than expected, September rate hike expectations could soften significantly, potentially restoring silver’s monetary premium. For now, however, the metal remains at the mercy of a dollar rally and a policy outlook that shows no signs of easing.
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