Silver Caught in a Macro Vice: Jobs Shock Hits Prices Even as Global Supply Deficit Widens

Silver drops over 10% weekly after US payrolls double forecasts, ending rate-cut hopes. Yet structural supply deficit and AI-driven industrial demand may limit downside.

A powerful US employment report has rattled precious metals markets, sending silver spiraling lower as rate-cut expectations unravel. The white metal closed at $67.96 on Friday, shedding 8.3% in a single session and more than 10% over the week. Earlier in the day, it had been trading around $74.12 before the selling avalanche intensified.

The trigger came from Washington. The Labor Department reported 172,000 new nonfarm payrolls for May, double the 85,000 that analysts had penciled in. The unemployment rate held steady at 4.3%, while average hourly earnings rose 3.4% year-on-year — enough to keep inflation concerns simmering.

For a non-yielding asset like silver, the implications are straightforward. Markets now price in a quarter-point rate hike by year-end, and the probability of a December move has risen. Federal Reserve official Jeffrey Schmid has already underscored the need for patience on monetary policy, echoing the sentiment from the April FOMC minutes, which pushed any easing window into late 2026 or early 2027 at the earliest.

The next Fed meeting on June 16-17 is unlikely to offer relief. With the labor market robust and inflation still above target, hopes for a 2026 rate cut have largely evaporated. Yet the sell-off has been so sharp that the relative strength index has fallen to 35, deep in oversold territory, and silver now trades roughly 11% below its 50-day moving average.

Despite the near-term macro headwinds, the structural case for silver remains unusually strong. This year marks the sixth consecutive annual supply deficit, according to the Silver Institute. Between 2021 and 2026, the cumulative shortfall has reached 820 million ounces. More than half of global demand is industrial — silver consumed in electronics, solar panels, and increasingly, in AI data centers. Operators of these facilities use tens of thousands of ounces per site in switchgear, connectors, and thermal management systems, and they cannot easily substitute the metal. That demand is price-insensitive.

Not all industrial segments are firing on all cylinders, however. The solar industry, a major consumer, is trimming its silver usage through efficiency gains and material substitution. The sector’s consumption is projected to drop from 5,804 tonnes to 4,698 tonnes this year. Total global supply is expected to slip slightly to around 33,100 tonnes, meaning robust investment buying will need to fill the gap.

Geopolitical tensions add another layer of complexity. The near-total closure of the Strait of Hormuz is keeping energy prices elevated, reinforcing inflation fears and the case for tight monetary policy. US President Donald Trump has described peace negotiations as entering their final phase, but Iran’s foreign minister disputes that assessment, and Hezbollah has rejected a US-brokered ceasefire proposal. A quick resolution looks unlikely.

For now, silver remains trapped between a persistent supply deficit and the tightening vice of US interest rates. Traders see June trading in a $72 to $88 range, with a base case of $80 to $85. Historically, the metal has staged sharp recoveries once the Fed actually begins cutting — but until that moment arrives, volatility on a high structural floor is the new normal.