Has the Silver Sell-Off Finally Run Its Course?

Silver shows signs of a technical floor after a sharp correction. A multi-year supply deficit and potential Fed rate cuts could drive prices higher in 2026.

Following a sharp decline from its January peak, the silver market is showing tentative signs of stabilization. The WisdomTree Physical Silver EUR ETC is now trading within a narrow range, with several key indicators suggesting the most intense selling pressure may have subsided for now.

Structural Demand Provides a Solid Base

Beyond price charts, fundamental demand presents a compelling case for silver. Industry analyses from Peel Hunt and TheStreet indicate the market is heading toward its sixth consecutive annual supply deficit. While mine production is projected to reach approximately 1.05 billion ounces in 2026, this will be insufficient to meet growing demand from the solar energy sector, electric vehicle manufacturing, and AI data center infrastructure.

Concurrently, the late March Commitments of Traders (COT) report hints at a cautious shift in sentiment. Speculative traders increased their long positions by 2,813 contracts, marking the first significant weekly rise after a prolonged period of reduction. This activity suggests institutional investors are increasingly viewing the recent price correction as a potential entry point.

A 44% Correction Points to Technical Exhaustion

Silver reached an all-time high near $121 per ounce in January 2026. What ensued was a severe correction of 44%, triggered by margin hikes on the CME and a strengthening US dollar. The spot price has since been oscillating between $68 and $71—a range many market technicians are interpreting as a potential technical floor.

This view is supported by key technical indicators. Daily charts reveal a formation known as a "hidden bullish divergence," where price levels hold steady even as momentum indicators have reset. This pattern typically signals that selling momentum is largely exhausted.

The Outlook for Q2 and Beyond

Could the current gold-to-silver ratio of 63:1 serve as a buy signal? Historically, this level has often indicated periods where silver is undervalued relative to gold. Whether this leads to silver outperforming gold will depend heavily on the future policy direction of the US Federal Reserve.

Major bank forecasts provide specific price targets. J.P. Morgan anticipates an average price of $81 per ounce for 2026, while UBS has set a year-end target of $85. The critical factor will be whether the Fed signals interest rate cuts in the second half of the year. Such a policy shift would likely act as a significant catalyst for the non-yielding precious metal.