Silver Whipsaws as India’s Import Tax and Solar Slowdown Collide with ETF Buying and Supply Deficit

After a Monday surge that lifted prices seven percent, silver quickly surrendered those gains, slipping back below $85 an ounce before steadying near $87. The erratic price action encapsulates a market torn between starkly opposing forces: India’s steep tariff hike, a solar-sector pullback, renewed ETF inflows, and persistent US inflation that is recalibrating Federal Reserve expectations.

India, a major consumer of physical silver, raised import duties on both gold and silver from 6 percent to 15 percent, a direct hit to demand. Jewelers and industrial end-users now face significantly higher acquisition costs, which is likely to curb near-term imports and inject downward pressure into the spot market. Similar tariff moves in the past have often triggered abrupt price swings.

Yet on the financial side, sentiment is pivoting. The iShares Silver Trust recorded weekly inflows of roughly 60.52 tonnes of metal, representing about $522 million in capital. This marks a sharp reversal from earlier year-to-date outflows, as large institutional players return to silver as a hybrid asset — part safe haven, part industrial exposure tied to artificial intelligence, electric vehicles, and 5G infrastructure.

The fundamental backdrop retains its bullish undertone. The Silver Institute forecasts a sixth consecutive annual supply deficit in 2026, with a shortfall of approximately 46 million ounces. Producers are already reaping the rewards: First Majestic Silver posted a 95 percent jump in first-quarter revenue to $476.7 million, while Heliostar Metals reported higher output from its Mexican operations. Even with rising mine supply, the market remains tight as electronics and renewable-energy technologies continue to absorb metal.

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That industrial demand, however, faces a notable headwind from the photovoltaic sector. Metal Focus expects solar-industry silver purchases to slide to roughly 151 million ounces in 2026, down from 186 million ounces the prior year. Soaring raw-material costs have forced manufacturers to rein in orders, dealing a blow to a segment that normally accounts for more than half of global industrial silver consumption.

The wild card in the equation remains US monetary policy. April consumer prices climbed 3.8 percent year over year, beating analysts’ estimates and dashing hopes for rapid Fed rate cuts. The CME FedWatch Tool now prices in a roughly 35.3 percent probability of a rate increase by December 2026, up from 23.5 percent earlier. A tighter policy stance typically lifts the dollar, which recently traded near a weekly high of 98.46 on the US Dollar Index, creating a headwind for dollar-denominated commodities like silver.

Adding to the uncertainty, the ongoing blockade of the Strait of Hormuz has pushed oil prices higher, reinforcing fears of stubborn inflation. If the Fed is forced to hold rates elevated for longer, the appeal of non-yielding assets such as silver diminishes. The gold-silver ratio, which had sunk to around 54-55 in early March — its lowest level since the start of that month — has since recovered to roughly 58, suggesting gold is currently outperforming its industrial cousin.

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For now, silver’s near-term direction depends on whether ETF buying can offset the drag from India’s tariffs and the solar industry slowdown. If financial inflows continue to accelerate, the metal may absorb the physical-market headwinds. But if rate expectations shift further toward tightening, the dollar’s renewed strength is likely to reassert itself as the dominant force.

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