Silver Sinks to Six-Month Low as Fed’s Hawkish Stance Trumps Record Supply Shortfall
28.06.2026 - 13:38:03 | boerse-global.de
Silver finds itself trapped in a rare contradiction: the physical market is tightening at its fastest pace in years, yet prices have fallen to a six-month low. The metal lost nearly 7% over the past week, briefly touching its lowest level since December, before staging a late-week recovery to close Friday at $59.69 per ounce — a daily gain of 3.15% that did little to cushion the weekly damage. The sell-off leaves silver roughly 20% below its monthly high and more than 50% off the 52-week peak of $121.78.
The primary culprit is monetary policy. Federal Reserve Chair Kevin Warsh used his first press conference to quash any lingering hopes of early rate cuts, stressing the central bank’s commitment to price stability a dozen times. The Fed simultaneously raised its PCE inflation forecast for 2026 to 3.6%, while headline PCE inflation accelerated to 4.1% in May. Markets have responded by pricing in three rate increases by year-end, with the first in September carrying a roughly 62% probability according to one measure, while the CME FedWatch tool puts the figure at 61%. Deutsche Bank expects two hikes — one in September and another in December. The resulting dollar strength and higher real yields are a double headwind for a metal that reacts acutely to the rate cycle. Macquarie notes that silver’s price dynamics have become macro-driven again, forecasting sideways trading for the remainder of the year with a gradual decline beginning in 2027.
Against this heavy monetary backdrop, the physical market tells a starkly different story. The Silver Institute has confirmed a sixth consecutive annual supply deficit for 2026, with the shortfall widening to an estimated 46.3 million ounces — 15% more than last year’s 40.3 million ounces. Since 2021, total inventory drawdowns have accumulated to nearly 762 million ounces. COMEX warehouse stocks, which stood at 531 million ounces in October 2025, have shrunk to roughly 315 million ounces. The deficit persists because roughly three-quarters of silver output comes as a byproduct of base-metal mining, making supply almost unresponsive to price signals.
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Demand patterns, however, are shifting underneath the surface. Solar panel manufacturers, which accounted for 186.6 million ounces of consumption in 2025, reduced their silver usage by 6% that year. Metals Focus projects a further 19% decline in 2026, to around 151 million ounces, as producers scramble to substitute the metal — silver can represent up to 29% of module costs. Emerging demand from AI data centers and automotive electronics is not yet large enough to fully offset the solar retreat. On the investment side, physical buying is expected to jump 20% to 227 million ounces, but this has so far failed to stem the price slide.
Technically, the charts offer little comfort. Silver closed below its 100- and 200-day moving averages, and the relative strength index sits at 34.3 — oversold, but not yet a clear reversal signal. The next support lies at $61.02, a level that is coming under increasing pressure following the weekly close under $59. A break lower would open the door to $54.46. The gold-silver ratio presents a mixed picture: one calculation puts it at roughly 64, while another shows it near 69.3, close to the peak reached during the Iran conflict. Historically, when the ratio climbs above 60, silver tends to outperform gold over the following 12 to 24 months as mean reversion kicks in.
The calendar holds two pivotal events. On Thursday, July 2, the U.S. jobs report for June will offer the next test — strong numbers would solidify rate-hike expectations and keep the dollar bid, while a miss could extend Friday’s bounce. Then on July 30, the Bureau of Economic Analysis will release June PCE data, the first report to incorporate oil prices after the Iran ceasefire. Should it show a deflationary impact, expectations for a September hike could recede noticeably, relieving some of the monetary pressure on silver. In a bear scenario — an unexpectedly aggressive Fed reaction to robust employment — the $55–$60 support zone would face a direct test. If it holds, the constructive annual picture remains intact despite the recent battering.
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