Silver’s $64.26 Floor? A Hawkish Fed and Solar Cost-Cutting Undermine a Shrinking Supply Gap
20.06.2026 - 04:14:32 | boerse-global.de
Silver’s price action has turned into a study in contradictions. The metal closed the previous week at $65.81 a troy ounce, but tumbled a further 2% on Friday to $64.26, dragging the weekly loss to 5% and pushing the monthly decline beyond 13%. Despite a structural supply deficit that is now in its sixth consecutive year, short-term forces are firmly in control—and they are overwhelmingly bearish.
The Federal Reserve is dictating the narrative. The central bank’s latest dot plot revealed that nine of 19 committee members expect at least one rate hike this year, while half of the members see increases as necessary by 2026. Fed Chair Kevin Warsh reiterated the institution’s commitment to price stability without offering a specific rate path, but the hawkish tone was enough to push the US dollar to a one-year high. Higher interest rates raise the opportunity cost of holding non-yielding assets like silver, and the market responded accordingly. A peace accord between the US and Iran, which would normally provide a geopolitical bid for precious metals, was largely ignored as investors focused on the inflation outlook and the prospect of persistently tight monetary policy.
On the industrial front, a separate headwind is gathering force. Silver has become an increasingly costly component in solar modules, now accounting for up to 29% of manufacturing costs compared with just 3% in 2023. Chinese industry giant Longi Green Energy is already replacing silver with copper in new cell designs, and the shift is accelerating. According to the Silver Institute, silver consumption in photovoltaics fell to 186.6 million ounces last year and is projected to drop a further 19% in 2025 to around 151 million ounces. New printing techniques and cell layout improvements could yield additional savings of up to 20%, analysts warn.
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Underpinning the market, however, is a stubborn supply gap. The World Silver Survey forecasts a deficit of roughly 46 million ounces this year, with total demand of more than one billion ounces outpacing mine production. Global output is edging higher, and recycling is at its strongest since 2012, but because most silver is produced as a by-product of other metals, miners are largely unresponsive to price signals. Industrial demand overall is expected to contract about 3% this year, yet the deficit remains intact, providing a floor that long-term bulls are betting on.
That relative cheapness is now attracting bargain hunters. The gold-silver ratio has climbed to 62—well above its recent low of 43—indicating that silver is undervalued compared with gold. Physical investment demand is forecast to surge 20% in 2025 as buyers take advantage of the discount. Technical indicators paint a mixed picture: the price sits nearly 13% below its 50-day moving average of $75.43, and the RSI stands at 38, suggesting the metal is approaching oversold territory but has not yet turned.
The road ahead hinges on inflation data and central bank communication. If the next US CPI report comes in hot, silver could face another leg lower. The divergence among institutional forecasts underscores the uncertainty: TD Securities sees the metal ending the year at $44, while J.P. Morgan anticipates an average price of $81. For now, the Fed’s grip remains tight, and until the macro headwinds ease, silver’s structural deficit may offer support but not an immediate catalyst for a rebound.
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