Silver’s Plunge From $121 to $64 Masks a Fractured Market as Physical Premiums Surge
10.06.2026 - 13:22:56 | boerse-global.de
The silver market is telling two radically different stories. On paper, the metal has surrendered nearly half its value since hitting an all-time high of $121 in January, sliding to $64.62 after the latest round of US strikes on Iran triggered a fresh wave of selling. Yet underneath the surface, a physical buying frenzy in China and a sixth consecutive annual supply deficit are creating distortions that bear little resemblance to the futures-driven rout.
A fragile ceasefire evaporates
Hopes of a geopolitical truce proved short-lived. Silver had briefly rallied above $68 on Tuesday after Iran and Israel halted hostilities, only for the US to launch new military operations against Iran on Wednesday following the downing of an American helicopter. The metal slumped 1% on the day to $64.62, its lowest since late March, and has now lost roughly 25% over the past month.
The near-total blockade of the Strait of Hormuz continues to send energy prices soaring, feeding inflation fears that are particularly toxic for non-yielding assets like silver. The jobs market is adding to the pressure: the US economy created 172,000 new positions in May, well above expectations, keeping the labour market running hot.
CPI looms as rate-hike bets harden
All eyes are on Wednesday’s US inflation report for May, expected to show consumer prices climbing to 4.2% — the highest reading in nearly three years. Markets now price in a roughly 70% probability of a quarter-point rate hike by December. A stronger dollar and rising bond yields are compounding the headwinds for silver.
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The inflation spike is largely energy-driven, but under Fed chair Kevin Warsh the central bank is seen holding rates elevated for longer. That backdrop has crushed speculative demand, yet the physical market tells a different tale.
China’s decoupling signals a structural squeeze
Despite the futures rout, Chinese importers are paying premiums of 10% above the spot price, and silver imports hit an eight-year high earlier this year. Local investors are fleeing a weak currency into hard assets. The Silver Institute projects that 2026 will mark the sixth straight year of supply deficits, with cumulative shortfalls from 2021-2026 reaching 820 million ounces. Global mine output stands at roughly 813 million ounces and cannot be rapidly expanded, since the bulk of silver is produced as a by-product of copper, zinc and lead mining.
Industrial demand from photovoltaic, electric vehicle and AI hardware sectors remains at record levels, ensuring that the structural deficit persists even as paper prices collapse. The gold-to-silver ratio currently sits near 63, still within its historical middle ground — levels above 80 would signal significant undervaluation.
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Technical test at the $61 watershed
Chartists see little relief in the near term. Silver is battling to hold support around $64, with the next floor at $61. A break below that opens the door to $55. On the upside, the psychologically critical $70 mark must be reclaimed to reverse the downtrend. Whether today’s CPI print fuels another leg lower or offers a temporary reprieve hinges on whether the 4.2% consensus proves accurate or hotter-than-expected. Either way, the disconnect between the paper selloff and the physical squeeze is widening — and that rarely ends quietly.
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