Silver’s $64.09 Reality: Solar Thrifting, a 46.3M oz Deficit, and the Fed’s Iron Grip

Silver price plunges 16% on hawkish Fed signals, but physical deficit deepens to 46.3M oz as COMEX inventories collapse and investor demand surges 20%.

The soaring price of silver has forced solar module manufacturers into drastic cost?cutting measures. Silber now accounts for more than 20% of a solar cell’s production costs, up from just 8% before the rally. Known in the industry as “thrifting,” new techniques – including optimised paste application and redesigned cell architectures – are expected to slash silver usage per cell to under five milligrams per watt by 2027. The result: total photovoltaic demand for the metal will drop almost a fifth in 2026.

Yet the global silver market is still heading for its sixth consecutive annual deficit. According to Metals Focus and the Silver Institute, the supply shortfall will hit 46.3 million ounces next year. While industrial users are economising, a surge in investor buying is more than offsetting the decline. Retail investors are piling into physical metal – coins, bars and fully?backed products – with investment demand forecast to jump 20% to 227 million ounces, the highest level in three years.

That physical tightness stands in stark contrast to what is happening in the financial markets. On Friday the silver price tumbled 2.61% to close at $64.09, bringing its monthly loss to nearly 16%. The metal now trades far below its 2025 high of around $121. The culprit is the Federal Reserve. Policymakers – including new Fed Chair Kevin Warsh – left the federal funds rate unchanged in the 3.5%-3.75% range but the updated dot plot signalled a further hike later this year, with the median forecast rising to 3.8%. A stronger dollar, which climbed to a one?year high, and rising Treasury yields have driven speculative capital out of the non?yielding asset.

The effect is visible in the futures market. But the physical market tells a completely different story. COMEX registered inventories have collapsed by 75% from their peak to roughly 79.9 million ounces, while buyers in China are paying double?digit premiums on the spot market. Industrial consumers from the photovoltaic and AI hardware sectors are absorbing every available ounce.

Other industrial segments continue to support demand. Data?centre build?outs, artificial?intelligence developments and the automotive industry all require significant amounts of silver. On the supply side, global mine output is expected to rise to a ten?year high of around one billion ounces in 2026. Yet that increase is insufficient to close the gap, leaving the structural deficit intact and forcing further belt?tightening among industrial users.

Technically, the outlook remains fragile. The price is well below its 50?day moving average of $75.18, and traders are eyeing the support zone between $61 and $61.50. A break below that level could trigger another leg lower. The relative?strength index, however, stands at 35.6 – approaching oversold territory – which could spark short?term bounces. All eyes this week are on US inflation data; a hot reading would reinforce expectations of a September rate hike and keep the pressure on silver.

Geopolitical developments add another layer. Investors have welcomed the interim US?Iran agreement, though market participants expect the normalisation of shipping routes to take months. For now, the macro headwinds from Fed hawkishness and a robust dollar are overwhelming the fundamental scarcity in physical supply, creating a tension that shows no sign of easing.