Hormuz Diplomacy and Fed Restraint Keep Silver Tethered as UBS Slashes Deficit Forecast
01.06.2026 - 15:42:54 | boerse-global.de
Silver’s rally has been nothing short of extraordinary — the metal has surged over 117% in the past twelve months and clocked a 130% gain in 2025. Yet it currently struggles to hold above $75, a far cry from the all-time high of $121.64 reached late January. The reason lies in a rare standoff: geopolitical turmoil over the Strait of Hormuz and an unyielding Federal Reserve are pulling the precious metal in opposite directions, leaving it range-bound.
The latest blow to the bullish case came from UBS, which dramatically revised down its silver supply deficit forecast. The bank now expects a shortfall of just 60 to 70 million ounces, a 77% reduction from its previous estimate of 300 million ounces. It also cut its projected investment demand for the full year from over 400 million ounces to 300 million ounces. That recalibration suggests the structural tailwind that propelled silver's surge is not as robust as once thought. J.P. Morgan Research, meanwhile, sees a more moderate path: an average price of $81 per ounce in 2026, though that would still be more than double the 2025 annual average.
The macro backdrop offers little relief. The US consumer price index for April posted its steepest increase in three years, cementing expectations that the Fed will hold rates steady well into 2027. The federal funds rate remains in the 3.50-3.75% target range, and a split FOMC — four members dissented at the last meeting, a level of discord unseen since the early 1990s — reinforces the hawkish tilt. Minneapolis Fed President Neel Kashkari has even raised the possibility of further rate hikes, citing Hormuz-related risks. Interest rate futures are fully pricing in a pause at the June meeting. For a non-yielding asset like silver, higher carrying costs are a persistent headwind.
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Yet the geopolitical picture keeps safe-haven demand alive. Shipping through the Strait of Hormuz has been largely blocked since February 28, with traffic falling to around 5% of its pre-conflict level of 3,000 vessels per month. The waterway carries roughly 20% of the world’s oil and a similar share of liquefied natural gas. Oil prices have spiked above $109 at times, stoking inflationary fears. Over the weekend, Washington and Tehran exchanged draft proposals for an extended ceasefire, though progress remains uncertain. Israel’s continued military push into Lebanon — despite a ceasefire announced more than six weeks ago — further complicates the diplomatic picture. Reports indicate Iran is willing to clear maritime mines within 30 days of a truce, which could ease shipping and lower energy costs, potentially giving the Fed more room to pivot.
The net effect is a stalemate. Silver is pricing like a risk asset, displaying a strong negative correlation with oil as investors fear higher energy prices will keep rates elevated. The gold-silver ratio, after dipping to 43 earlier this year, has recovered to around 59 — below the long-term modern average of 70, but no longer signaling historic undervaluation. While the Silver Institute has documented five consecutive years of global supply deficits and expects a sixth in 2026, the market is clearly focused on near-term macro crosscurrents.
All eyes now turn to this week’s US jobs report. Strong payroll numbers would bolster the dollar and pile more pressure on silver, while a weak print could open a window for a rebound. Ultimately, whether the metal can break out of its $72–$88 June trading range — with a base case of $80–$85 — depends on the interplay between Hormuz diplomacy and Fed messaging. If tensions ease and the dollar softens, a swift move toward $90 is possible. If industrial demand cools and the Fed stays hawkish, the $70 threshold becomes a very real test.
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