Silver Faces Cross-Currents: ETF Outflows and Geopolitical Risk Battle Deepening Supply Deficit

Silver slides as ETF holdings drop for fourth day, Middle East conflict intensifies, and Fed sends mixed signals on rate policy despite easing June inflation data.

The retreat in the physical silver market accelerated on 13 July when the iShares Silver Trust, the world's largest silver-backed ETF, shed 17 tonnes of metal for the fourth consecutive trading session. The fund's holdings slipped to roughly 14,850 tonnes, while the SPDR Gold Trust also gave up more than three tonnes, leaving its stockpile at about 1,002 tonnes. The selling coincided with a fresh escalation in the Middle East: US airstrikes against Iran entered a third night, President Trump announced a renewed naval blockade of the Strait of Hormuz accompanied by a 20 percent freight charge, and Iran retaliated by attacking two tankers belonging to the United Arab Emirates, killing an Indian seaman and injuring eight others.

The spot price reflected the frayed sentiment with extreme intraday swings on 14 July. Valuations ranged from as low as $57.56 per ounce (according to FX Leaders) and $57.64 (reported by Lao Dong Newspaper) to as high as $59.40 (Finanzen.ch). The wild gyrations across a single session — from roughly $57.50 to nearly $59.50 — underscore how nervously the market is digesting every fresh economic data point and central bank signal.

Inflation Data and the Fed’s Two-Pronged Message

The catalyst for the July 14 moves was the release of US inflation figures for June. The headline rate eased to 3.5 percent from 4.2 percent in May, while core inflation dropped to 2.6 percent from 2.9 percent. According to ch.marketscreener.com, traders now assign only a 10 percent probability to a July rate hike, down from 35 percent previously. Yet the Federal Reserve sent mixed signals: Governor Waller indicated a willingness to raise rates further if core inflation remains stubborn, and Fed Chairman Kevin Warsh told Congress he would show "zero tolerance" for persistently high inflation. The dissonance leaves silver caught between a softening inflation narrative and a hawkish policy stance.

Structural Deficit Narrows but Remains the Dominant Theme

Beyond the daily noise, the market continues to wrestle with a chronic supply gap. The World Silver Survey 2026 confirms a sixth consecutive annual deficit, though the shortfall is shrinking — from 143 million ounces in 2025 to an estimated 73 million ounces in 2026, and further to 25 million ounces in 2027, according to the secondary article's data. The tightening is largely driven by a slowdown in industrial demand, forecast to fall from 657 million ounces last year to 642 million in 2026 and 618 million in 2027. Jewellery fabrication is also expected to drop sharply, from 189 million ounces to 157 million this year.

On the supply side, a modest relief valve is opening. Silver Mountain Resources aims to restart the dormant Reliquias mine in Peru during the third quarter of 2026; the processing plant, with a daily capacity of 2,600 tonnes, is already 95 percent complete. In India, however, the government’s hike in import duties on gold and silver to 15 percent and tighter import restrictions have crushed inflows. Indian silver imports collapsed to just 46.8 tonnes in May, compared with 534.3 tonnes in the same month last year, pushing the physical premium to 10 percent. The Perth Mint also reported a 19 percent month-on-month drop in silver sales for June, and a 37 percent decline year-on-year, signalling flagging retail investor appetite.

Analyst forecasts have been trimmed across the board. UBS now sees silver averaging $85 in the second and third quarters of 2026, falling to $80 by year-end and $75 by the first quarter of 2027. HSBC is more cautious, with a 2026 average of $75 and a year-end projection of $70, then $68 in 2027 and $65 at the end of that year. Saxo Bank argues a new catalyst is required to reignite the rally. BNP Paribas, however, insists the medium- to long-term fundamentals — central bank purchases, de-dollarisation trends, and industrial demand — remain intact.

Technical Levels Under Pressure

Chart-based signals offer little reassurance. FX Leaders identifies a symmetrical triangle pattern with an RSI at 38.51 and positive divergence; a breakout above $61.17 and $63.31 would be bullish, while a fall below supports at $55.71 and $54.48 would turn bearish. FXStreet notes the metal is trading below the 9- and 50-period EMAs inside a descending channel, with resistance at the 9-day EMA ($59.37) and the 50-day EMA ($66.63). Support lies at the seven-month low of $55.63, with further downside to $46.90 possible. Bloomberg Intelligence analyst Mike McGlone remains outright bearish, arguing that the correction from above $100 to around $59 is not over. He warns that historical highs near $50 in 1980 and 2011 could act as support, not a floor, and points to the premium of silver over its ten-year moving average of $31 at end-2025 — the widest since 1979 — as a warning that a 47 percent decline from $59 is mathematically plausible, especially given that inflation is now 4.2 percent versus 14.8 percent then.

Mining Stocks: Upgrades and Downgrades in Tandem

A mixed picture prevails among producers. Seeking Alpha upgraded Hecla Mining to "Buy" on 14 July, citing an attractive valuation after the recent silver sell-off and noting the company carries a net cash position, zero long-term debt, and an untapped $225 million credit line after the first quarter of 2026. Hecla is targeting an annual production path of 20 million ounces. Americas Silver Corp., however, lost roughly 10 percent in a week despite reporting a record production of 787,000 ounces. Its market capitalisation stands at C$2.05 billion, with a negative profit margin of 35.63 percent, though analysts see a target of C$13.86, implying upside of 142.7 percent.

In Vietnam, domestic prices for 999-grade silver fell by 30,000 to 31,000 dong per tael in line with the global retreat.

The gold-to-silver ratio, which dipped below 55 in May, remains a key barometer of relative value. Several institutions now see a potential floor in the $70–$75 range for silver over the medium term, provided the structural deficit persists. For the immediate future, the trajectory hinges on the Strait of Hormuz stand-off and the Fed’s reaction to incoming inflation data — factors that could either reignite safe-haven flows or drive further liquidation.