Silver at a Fork in the Road: A Hawkish Fed Debut and an Iran Truce Battle for Control of the Metal's Next Move

Silver clings to $68.13 amid conflicting forces: Fed's hawkish stance caps rallies, but a potential Iran peace deal and persistent supply deficit support prices. The gold-silver ratio signals cheapness.

The white metal is clinging to $68.13 an ounce after a brutal 24% monthly rout, but the forces that will determine silver’s trajectory over the coming weeks are suddenly pulling in opposite directions. On one side stands the Federal Reserve, where incoming chair Kevin Warsh presides over his first policy meeting on June 16, likely delivering a hawkish message that caps any near-term rally. On the other, a potential Iran peace deal brokered by Pakistan and Qatar could defuse the energy shock that has been fanning inflation, removing a major headwind for the precious metal.

Warsh’s opening act and the dot-plot reset

Markets are already pricing a 70% probability that the Fed will need to raise rates before year-end, according to CME FedWatch. The central bank is widely expected to keep its benchmark rate in the 3.50%–3.75% corridor at the June 16–17 meeting, but the real action lies in the updated dot-plot projections and Warsh’s tone at the press conference. Goldman Sachs has scrapped all rate cuts for 2026 from its outlook, shifting its first easing expectations to June and December 2027. If the dot plot indeed eliminates the last remaining cut for next year, or if Warsh signals a regime change by abolishing the dot plot entirely, silver’s consolidation phase could stretch deep into the third quarter. Any hint of a September easing would provide genuine tailwinds.

Diplomacy dents the inflation scare

President Trump has paused further airstrikes against Iran, and reports suggest a memorandum of understanding – covering the reopening of the Strait of Hormuz, a nuclear solution, and sanctions relief – could be finalized as early as this weekend. Tehran is expected to accept the terms. For silver, a de-escalation would defuse the energy-driven inflation spike that pushed US headline CPI to 4.2% in May, the highest since April 2023, with energy costs surging 23.5% amid the Iran conflict. Lower inflation expectations reduce the pressure on the Fed to hike, but they also weaken the safe-haven bid for precious metals. The net effect is ambiguous in the short term.

Structural deficit deepens even as solar demand dims

Beyond the macro theatre, the supply-demand calculus remains firmly in silver’s favour. The World Silver Survey projects that global silver consumption will exceed mine output for the sixth consecutive year in 2026, extending a deficit that, according to Metals Focus, reached roughly 46 million ounces in 2025 – up from about 40 million ounces the year before. However, the composition of demand is shifting. Solar photovoltaic demand is forecast to fall to around 151 million ounces in the current year, a drop of nearly one-fifth from the prior year, as more efficient cell technologies require less silver per panel. That headwind is partly offset by rising usage in electric vehicles and data centres, but the industrial mix is clearly evolving.

The gold-silver ratio flashes a cheap signal

Silver’s relative cheapness against gold has become pronounced. The gold-silver ratio climbed to about 63.9 in mid-June, up from 55.16 in May, marking the widest discount of the year. A 25% correction within a mature bull market does not constitute a trend change, but it does mean that silver needs a catalyst – either from the Fed pivot or a finalised Iran accord – to reclaim its 50-day moving average near $75.82. With Juneteenth shortening the trading week to Wednesday and Thursday, all reactions will be compressed, and the annualised 30-day volatility of nearly 61% suggests the metal is primed for another sharp move.