Silver Dives on Fed Hawkishness as Six Years of Supply Deficit Deepen; PCE Data Next

Silver has been caught in a brutal two-way squeeze. The metal plunged almost 16% over the past month to close Friday at $64.09 a troy ounce, driven by a hawkish turn at the Federal Reserve and a sharp decline in geopolitical risk premiums. Yet beneath the selloff, the physical market is screaming scarcity: the world is heading into a sixth consecutive annual supply deficit, and exchange inventories have collapsed by three-quarters since 2020.

The immediate catalyst was the Federal Open Market Committee’s decision to hold the federal funds rate at 3.50%–3.75%. New Fed Chair Kevin Warsh signaled a high readiness to raise rates further, and several committee members discussed additional tightening by the end of 2026. The central bank now expects the core PCE price index to climb to 3.6%, keeping inflation stubbornly above target. Because silver carries no yield, it is acutely sensitive to rising real rates and a stronger dollar.

At the same time, the metal lost its safe-haven bid. The U.S. and Iran are nearing a preliminary agreement that would reopen the Strait of Hormuz, calming energy markets and dragging oil prices lower. Lower crude reduces global inflation expectations and, in turn, the need to hedge against currency debasement. Investors have piled into the U.S. dollar instead, heaping more pressure on silver.

Physical Belt Tightens Despite the Price Collapse

The paper market and the physical market are telling opposite stories. The Silver Institute projects a global supply deficit of 46.3 million ounces for 2026, the sixth straight year of shortfall. Cumulative supply missed demand by more than 760 million ounces since 2021, steadily draining above-ground stocks. COMEX silver inventories have fallen roughly 75% from 2020 levels to just 88 million ounces of deliverable metal.

Should investors sell immediately? Or is it worth buying Silber Preis?

Mine production has stagnated and offers little relief. On the demand side, solar manufacturers – a major user of silver – are drastically reducing their material intensity through new technologies. The Silver Institute expects solar-sector demand to drop 19% this year, equivalent to about 151 million ounces of lost consumption. However, the metal remains irreplaceable in heat-management components for data centers and AI hardware, a sector that is ramping up rapidly. This structural demand, combined with a forecast 18% jump in physical investment by private buyers in the U.S., is picking up the slack from the solar thrift.

Chart Levels and the Next Catalyst

Technically, silver is testing a critical support zone around $63.80. A break below that level could trigger a swift decline toward $61. On the upside, the $71 area – corresponding to the 61.8% Fibonacci retracement of the current downtrend – stands as the first major resistance.

Looking ahead, analysts at J.P. Morgan maintain an average price target of $81 for the year, citing the tightening physical balance and structural demand tailwinds. The gold-silver ratio, currently at 61.7, suggests the white metal is moderately undervalued relative to gold. This week, fresh U.S. economic data will dictate near-term direction. A lower-than-expected inflation print would ease the pressure of hawkish monetary policy and could offer silver a lifeline. But for now, a market that is physically starved remains at the mercy of the Fed.