Silver Slides Below $65 as Fed Hawks and Solar Thrift Collide With a Deepening Physical Shortage
Published on 06/22/2026 at 11:33 | Redaktion boerse-global.de
The white metal is caught in a vicious tug-of-war. Six consecutive years of supply shortfalls are doing little to stop a slide that has now erased nearly half the value silver notched up at its January peak. On Friday, the spot price broke below $65 an ounce for the first time since June 11, capping a weekly loss of roughly 4.5%. What makes the sell-off particularly jarring is the backdrop: a physical market where deficits are deepening, not easing.
The central tension lies in the Federal Reserve’s hawkish pivot under new chair Kevin Warsh. The June meeting left interest rates unchanged, but the accompanying statement stripped out dovish language and raised the median rate projection. Nine of the 19 FOMC participants now see at least one rate hike before the end of the year, and bond markets assign a 70% probability to a move by September. Higher rates strengthen the dollar and push bond yields up, making a non-yielding asset like silver far less attractive to investors. The recent collapse of U.S.-Iran talks in Switzerland has only added to the uncertainty — an interim détente had briefly eased shipping conditions through the Strait of Hormuz, but the breakdown now threatens to keep energy flows constrained and geopolitical premiums elevated for months.
The industrial side of the equation tells a more nuanced story. The solar industry, once a voracious consumer of silver, is rapidly substituting away from it. Global photovoltaic demand for the metal is expected to fall 7% this year to roughly 194 million ounces, even as installed solar capacity continues to grow at a 15% clip. Chinese manufacturers are leading the charge: Longi Green Energy plans to replace silver with base metals such as copper, with mass production scheduled to begin in the second quarter of 2026. Jinko Solar and Shanghai Aiko Solar Energy are similarly pivoting to silver-free or copper-based cell designs. The cuts are deep enough that some large module makers have slashed their own consumption by 19% to around 151 million ounces. But substitution is not frictionless — copper can raise mounting costs, and high-efficiency TOPCon cells still rely on silver for their high-temperature processes.
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The slack from the solar sector is being partially taken up by other industries. Artificial intelligence, data centers, electric vehicles, and broader automotive electronics are demanding more silver because of its superior electrical conductivity. The metal’s physical properties are hard to replicate in advanced circuitry and high-performance connectors. This growing appetite has not been enough to offset the solar pullback, but it has helped cap the downside for industrial offtake. Meanwhile, mine supply remains stubbornly constrained. Most silver is produced as a by-product of copper and zinc mining, which makes it nearly impossible to ramp up output quickly even when prices signal scarcity. Global annual production is forecast to inch up only marginally in 2026 to 1.05 billion ounces.
Despite the demand erosion in solar, the market is heading into a sixth consecutive supply deficit of 46.3 million ounces. Physical investment has provided a measure of support: Indian demand for coins and bars surged 33% last year, reflecting strong retail appetite in the world’s largest silver-buying nation. Over a 12-month horizon, silver still trades roughly 80% higher. But near-term momentum is overwhelmingly bearish. The gold-to-silver ratio, which stood at 55:1 in May, has jumped to around 64:1 after the FOMC meeting, underscoring how aggressively silver has underperformed its yellow counterpart.
Institutional forecasts reflect the deep uncertainty. TD Securities sees silver falling to $44 an ounce, while a particularly bullish participant in the LBMA survey projects a high above $165. J.P. Morgan expects an average of $81, and a Reuters poll of analysts lands near $79.50. The irony of the current sell-off is that geopolitical risk itself has not abated — but the inflation expectations it has stoked have hardened the Fed’s stance, creating a self-reinforcing downdraft for the metal. Should the Iran situation de-escalate and energy prices retreat, the narrative of impending rate hikes would lose its anchor, allowing silver’s structural deficit and growing industrial demand to take center stage once again. For now, however, the metal is caught between a hawkish central bank and a physically tightening belt, with no clear catalyst in sight to break the deadlock.
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