Silver Prices Walk a Tightrope as Tariff Truce and Supply Gap Battle Rate Headwinds

Silver rebounds on US-China tariff pause but faces macro headwinds from surging inflation, rising yields, and potential rate hike. Supply deficits persist, yet demand shifts add complexity.

The white metal is caught in a tug-of-war that has become all too familiar: a physically tightening market on one side, and a hawkish monetary backdrop on the other. After a punishing 10.71% weekly slide that knocked silver to $77.55 by Friday, the spot price edged back to around $77.72 on Monday. The mini-recovery was fuelled by a 90-day pause in US–China import tariffs, which were slashed from 145% to 30% on silver-linked products. That gave Chinese buyers, who had deliberately run down inventories during the trade standoff, an excuse to restock aggressively.

Yet that buying spree is colliding with a very different force. The macroeconomic winds have shifted decisively against zero-yielding assets. April’s wholesale inflation in the United States surged at its fastest pace since 2022, while consumer prices recorded their sharpest jump since 2023. That has kept the pressure on the Federal Reserve to hold rates steady – and some market participants are now betting on a rate hike in December. Ten-year US Treasury yields are hovering near 4.6%, making the opportunity cost of holding silver uncomfortably high.

The technical picture reflects the strain. Silver closed Friday just a whisker above its 50-day moving average of $77.13, while the 100-day average sits a full $5.60 higher at $82.73. The short-term trend has clearly lost momentum, and traders are watching the $76 level as a critical support. A break below that could trigger further rotation out of precious metals as yields climb.

None of this erases the fact that the physical market is anything but comfortable. The Silver Institute projects a sixth consecutive supply deficit in 2026, with a gap of around 67 million ounces. Another estimate puts the shortfall at roughly 46.3 million ounces, up from 40.3 million the year before. In Asia, the tension is visible in the premium paid at the Shanghai Gold Exchange, where an ounce fetches about $88.77 – a 13% markup over the Western spot price.

Demand patterns are also shifting beneath the surface. Solar giant Longi Green Energy Technology is planning to replace silver with copper in new-generation photovoltaic cells, and analysts expect solar-related offtake to slide to 151 million ounces in 2026. That loss is being offset, at least partially, by booming consumption in artificial intelligence data centres, semiconductor fabrication, and electric vehicles – all sectors that rely on silver’s superior electrical conductivity.

The geopolitical layer adds more friction. The closure of the Strait of Hormuz has kept crude oil above $100 a barrel, stoking inflation fears that theoretically support silver as a hard asset but simultaneously reinforce the case for tighter monetary policy. A stronger dollar is already making the metal more expensive for buyers outside the US.

For now, the macro headwinds are drowning out the supply deficit narrative. But the physical backdrop remains tight enough that any dovish shift from the Fed – or a fresh escalation in trade tensions – could quickly reverse the calculus. Until then, silver is walking a narrow path between a very real scarcity and a very hawkish central bank.