Silver’s Six-Year Supply Deficit Cracks Under Weight of Inflation, Rate Fears and a Solar Industry in Retreat
11.06.2026 - 16:45:38 | boerse-global.de
A market that has been structurally undersupplied for half a decade normally commands a premium. Silver is defying that logic. The white metal has tumbled to around $63.95 a troy ounce — its weakest level since late March — despite the fact that global inventories have been drawn down for six consecutive years. The disconnect underscores just how powerful the headwinds from monetary policy, geopolitics and shifting industrial demand have become.
From a January peak of $121, silver has shed nearly half its value. The latest leg lower saw it breach the psychologically important $64 threshold on Thursday, extending a slide that began from an intermediate high of $80. Over the past month the metal has lost roughly 20%, and on a month-over-month basis the decline is closer to 26%. Against the same period last year, however, it still trades almost 76% higher — a reminder of how dramatic the 2025 rally was before it unravelled.
The immediate catalyst for the current rout is the US dollar’s renewed strength. Because silver is priced in dollars, a firmer greenback makes it more expensive for foreign buyers, crimping demand. But the bigger force is the repricing of Federal Reserve policy. May’s US consumer price index came in at 4.2% year-on-year, the hottest reading since April 2023, with energy costs accounting for more than 60% of the monthly increase. Markets now fully price in a 25-basis-point rate hike by December, and the prospect of tighter monetary policy is devastating for an asset that offers no yield.
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A geopolitical twist has made matters worse. The United States launched a second day of strikes against Iranian targets, and the Strait of Hormuz is effectively closed, disrupting energy flows from the Persian Gulf. That has pushed oil prices higher, which in turn feeds inflation and deepens the case for Fed tightening. What might normally be a haven play for precious metals has turned into a headwind — higher energy costs are raising the opportunity cost of holding silver rather than bonds.
The industrial side of the equation is also deteriorating. Silver’s reliance on the photovoltaic sector, long considered a pillar of demand growth, is becoming a liability. Solar-cell makers consumed 186.6 million ounces of the metal in 2025, down 6% from the prior year. Metals Focus now forecasts a further 19% drop in 2026 to around 151 million ounces. With silver accounting for as much as 29% of module costs, manufacturers have accelerated substitution efforts: Longi Green Energy plans to shift to copper from the second quarter of 2026, Jinko Solar is preparing copper-based modules, and Shanghai Aiko Solar already offers silver-free cells. Overall industrial offtake fell 3% to 657.4 million ounces last year, the first decline since the pandemic.
Against that backdrop, the supply deficit — projected at 46.3 million ounces for 2026 by the Silver Institute — has done little to prop up prices. Aggregate withdrawals from inventories since 2021 have reached nearly 762 million ounces, and COMEX stocks have shrunk from 531 million ounces in October 2025 to roughly 315 million ounces. New Chinese export restrictions on silver, requiring state licences from 2026, will tighten supply further. Yet the market remains fixated on demand-side risks.
Chart watchers are now eyeing the next support zone at $62.80. A break below that level could open the door to a rapid decline toward $60. The LBMA consensus forecast for 2026 stands at $79.57, but the range of individual estimates — from $42 to $165 — reveals deep uncertainty. All eyes will be on the Federal Reserve’s June 17 meeting. Until policymakers signal any willingness to ease, the deficit alone looks unlikely to reverse the downtrend. Silver needs a new catalyst — from inflation, the dollar or industrial demand — to regain its footing.
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