Silver’s Deepening Supply Crunch Clashes With a Hawkish Fed and Easing Geopolitics
Published on 06/22/2026 at 05:53 | Redaktion boerse-global.de
Silver is heading into its sixth straight year of supply shortage, with the deficit widening to 46.3 million ounces, yet the metal has lost nearly half its value since touching an all-time high near $122 (the January peak of $121.78). The disconnect between tightening fundamentals and a brutal price rout has rarely been starker. Currently trading at $64.09 per ounce, silver has shed almost 16% in the past 30 days alone.
The immediate culprit lies in the Federal Reserve’s hawkishness. At the June 17 meeting, Fed chair Kevin Warsh held interest rates steady for the fourth consecutive time while reiterating that inflation remains too high at 4.2% — the hottest reading since early 2023. Nine of the 19 policymakers now pencil in at least one rate hike for this year, and markets assign roughly a 70% probability to a move by September. Higher rates boost the dollar and raise the opportunity cost of holding non-yielding assets like silver, keeping the metal on the defensive.
A simultaneous easing of geopolitical tensions has further sapped the metal’s safe-haven appeal. Over the weekend, US and Iranian delegations met in Switzerland, where mediators reported meaningful progress. A signed memorandum calls for the immediate reopening of the Strait of Hormuz. While Israel has stated it is not bound by the accord, the acute risk of escalation in the Middle East has receded, stripping away the risk premium that had earlier propped up precious metals.
On the supply side, the market remains structurally constrained. Global mine output is shrinking by roughly 2% this year, largely because an estimated 70–80% of silver production comes as a byproduct of copper, lead and zinc mining. Producers cannot easily ramp up primary silver output in response to price signals, so the deficit continues to widen — from 40.3 million ounces last year to 46.3 million ounces in 2026.
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Demand patterns are also shifting. The solar photovoltaic industry, one of the biggest end-users, is actively reducing its silver consumption. After taking 186.6 million ounces in 2025 — a 6% decline from the prior year — manufacturers are expected to cut another 19% this year, bringing the solar total down to roughly 151 million ounces. The high prices of recent months spurred thrifting efforts as producers lowered silver content per cell.
But other sectors are picking up the slack. The surge in artificial intelligence and data center buildout is reshaping the demand profile: global IT power capacity has grown from just 0.93 gigawatts in 2000 to nearly 50 gigawatts in 2025 — a 53-fold increase. Electric vehicles, charging infrastructure and grid expansion for renewable energy are also adding to industrial consumption. This structural hunger is partly offsetting the loss from solar.
The price collapse has meanwhile lured long-term-oriented buyers back into the market. Western investment demand for physical silver is expected to jump to 227 million ounces this year, the highest in three years. That provides a floor beneath a market that is otherwise caught between macro headwinds and tightening supply.
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Technically, the metal is in precarious territory. It trades well below its 50-day moving average at $75.18 and about 14.75% beneath that level. The relative strength index stands at 35.6 — deep in oversold territory but not yet generating a clear buy signal. The critical support zone sits between $60 and $61. If that holds, a bottoming process could take shape; a break below would put the October low of $45.51 back in play. On the upside, initial resistance lies at $71.80, followed by $83.75.
The gold-silver ratio currently hovers around 64, close to the long-term average of 65–75. Historically, a ratio above 80 has signaled that silver is undervalued relative to gold — a threshold the market is nowhere near. In the near term, the Fed’s tightening bias and the diplomatic thaw in the Middle East will likely keep a lid on prices. But with physical scarcity deepening and industrial demand broadening, the downside may be limited as long as the $60–$61 support holds.
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