Silver's Supply-Deficit Puzzle Deepens as Oversold Reading and Fed Uncertainty Collide
Published on 07/19/2026 at 14:04 | Redaktion boerse-global.de
Silver closed Friday at $56.22 per ounce, eking out a 0.82% gain but still nursing a 17.32% monthly loss and a staggering 53.84% slide from its January record high. The precious metal finds itself in a peculiar bind: the market is in its sixth consecutive year of structural deficit — last year's shortfall reached 46.3 million ounces — yet the price keeps falling. Industrial demand, which accounts for about 58% of total consumption, continues to climb thanks to solar panels, electronics, and electric vehicles, but that has done little to halt the sell-off.
The 14-day relative strength index has dropped to 34.6, deep in oversold territory and historically a trigger for technical rebounds. Market observers are watching closely for signs of a reversal, though they caution that oversold readings alone rarely break a downtrend when macro headwinds are this strong.
Monetary policy remains the dominant force weighing on silver. Federal Reserve Chair Kevin Warsh is due to testify before Congress this week, and the July meeting of the Federal Open Market Committee on the 28th and 29th is widely seen as the next pivotal event. Markets are pricing in a pause, but any hawkish surprise would further punish non-yielding assets like silver. Real yields have risen as the Fed holds firm on its 2% inflation target, and a strong dollar is compounding the pain for foreign buyers.
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Geopolitical turmoil, which normally bolsters safe-haven demand, has so far failed to lift silver. Escalation between the United States and Iran — including fresh U.S. airstrikes and a suspension of the underlying bilateral agreement by Tehran — has sent oil prices higher and reduced shipping traffic through the Strait of Hormuz to a three-week low. Yet these tensions have been overshadowed by fears about industrial demand and the aggressive rate environment.
On the supply side, production constraints add another layer of complexity. Peru, a major silver producer, has declared an energy crisis that is disrupting local mining output. The combination of chronic supply deficits and a Peruvian squeeze briefly pushed silver to around $87 in mid-May — a level that now looks distant — and pushed the gold-silver ratio below 55, historically a sign of silver outperformance. That ratio has since widened again as silver's losses have outpaced gold's.
For now, the market remains caught between powerful opposing forces. Technical indicators suggest the metal is due for a bounce, and the structural supply gap provides a medium-term bullish narrative. But until the Fed signals a clear pivot or geopolitical risk translates into sustained safe-haven buying, the short-term path of least resistance still points lower. The July FOMC decision is likely to determine which side gains the upper hand.
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