Silver Trades at a Crossroads as ETF Outflows and Fed Hawkishness Battle Unyielding Supply Deficit

A brutal correction from January’s record highs has left silver clinging to the $75 level, caught between a tightening macro environment and a physical market that simply cannot deliver enough metal. The metal’s next major test arrives June 16–17, when the Federal Open Market Committee meets for the first time under new Chair Kevin Warsh — a known hawk — and publishes its updated dot plot.

Investors have been voting with their feet. ETF holdings in silver have slumped by nearly 70 million ounces to around 794 million ounces, according to UBS. The exodus reflects a broader shift in expectations: after the April consumer price index came in hotter than forecast at 3.8%, the probability of a June rate cut collapsed from roughly 48% to below 8% on the CME FedWatch tool. Markets now assign about a 60% chance of at least one more rate hike before year-end.

That rate repricing has hit silver hard. The metal touched an all-time high of $120 per ounce in late January — some data points put the peak at $121.64 — before slumping back toward $74 by late May. A brief bounce lifted it to $75.64 on June 1, a gain of 0.53% on the day, but the trend remains fragile. Over the past month silver has managed only a 4% advance, while its year-on-year gain of roughly 117% underscores just how far it has come.

Geopolitical tailwinds add to inflation fears

The retreat from the record high began in late February as the Iran conflict drove oil prices higher and reignited inflation concerns. The situation has since escalated: direct military exchanges between Iran and the US, Tehran’s suspension of diplomatic communication with Washington, and stalled talks over reopening the Strait of Hormuz all point to sustained geopolitical risk. Higher oil prices feed into inflation expectations, which in turn keep the Fed’s foot on the brake — a toxic combination for a zero-yielding asset like silver.

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Supply deficit remains the floor

Yet beneath the macro headwinds, the physical market tells a different story. The Silver Institute projects the sixth consecutive structural deficit in 2026, amounting to around 67 million fine ounces. UBS has trimmed its deficit forecast from 300 million ounces to between 60 million and 70 million ounces, while also lowering its investment demand outlook to 300 million ounces. Still, the market has run deficits for six years running, with no quick fix on the supply side as mines struggle to ramp up production.

Industrial demand continues to provide a crucial underpinning. Solar panel manufacturing now accounts for roughly 16% of global silver consumption, and additional demand is flowing from electric vehicles, 5G infrastructure, semiconductors, and medical technology. That structural bid keeps the metal from falling too far — even as investment appetite fades.

Bank forecasts and technical levels

Despite the correction, analysts remain broadly constructive. ING forecasts an average silver price of $83 in 2026, with a mid-year peak of $85. UBS targets $85 by the third quarter, and Bank of America recently raised its 2026 average estimate by 32% to $85.93, from a prior $65. For the immediate term, the expected June trading range sits between $72 and $88, with a base case of $80–$85.

Technically, the critical support zone lies between $70 and $72. A break below that — triggered perhaps by stronger US jobs data or a more hawkish Fed message — could accelerate the downtrend. On the upside, $75.70 is the pivot that silver needs to reclaim to shift momentum. Until then, the bears hold the upper hand.

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The Fed’s dot plot as the pivot point

The June FOMC meeting thus looms large. With the dot plot offering the first updated rate projections since March, any signal that the Fed sees no near-term cuts will keep the pressure on silver. Conversely, even a hint of easing could refocus attention on the deepening supply deficit and the robust industrial demand that many believe will eventually reassert itself.

For now, silver is walking a tightrope. The ETF selloff and the hawkish turn in Washington are powerful gravitational forces, but beneath them lies a market that has been structurally short for years. The question is which force gives way first at the June decision.

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