Silver’s $73.74 Tightrope: A Market Squeezed by a Divided Fed, Solar Substitution, and a Sixth Year of Deficit

Silver trades near $73 amid Fed policy rift, falling solar demand, and persistent supply deficit. New tech and investor demand offer some support.

Silver closed April at $73.74 per ounce, a price that masks a tug-of-war between structural scarcity and macroeconomic headwinds. The metal is caught between a supply deficit that refuses to ease and a US Federal Reserve that just delivered its most fractured policy signal in over three decades.

The Fed’s Internal Rift Hits Hard

The central bank held its benchmark rate steady at 3.50% to 3.75%, but the real story was the discord behind the decision. The Federal Open Market Committee recorded its widest voting split since 1992, with multiple members pushing to scrub any hint of future rate cuts from official communications. Chair Jerome Powell struck a cautious tone, signaling the Fed would wait until the energy-driven inflation shock fades before easing.

For a non-yielding asset like silver, that stance is poison. Rising bond yields and a strengthening dollar have drained momentum from the precious metal, leaving it to trade in a narrow band around $73 in early May. On a monthly basis, the losses are modest, but the annual picture tells a different story — prices have more than doubled year-over-year.

Solar’s Copper Revolution Cuts Deep

The industrial demand side — which accounts for over half of annual silver consumption — is undergoing a tectonic shift. Silver makes up an estimated 17% to 29% of solar module costs, a burden that manufacturers are increasingly unwilling to bear. Longi Green Energy and Jinko Solar are accelerating their switch to copper in panel production, while Shanghai Aiko Solar Energy has already begun producing silver-free cells.

Metals Focus now projects photovoltaic silver demand will tumble 19% this year to roughly 151 million ounces. That’s a significant chunk of demand to lose, though the broader solar buildout continues unabated — China alone exported 68 gigawatts of solar products in March 2026.

New Tech Demand Fills Some Gaps

The void left by solar is not going unfilled. AI data centers, 5G infrastructure, and electric vehicles are emerging as powerful new demand engines for the highly conductive metal. Whether these sectors can absorb the slack quickly enough remains an open question, but the trajectory is clear: the industrial demand base is diversifying away from its solar-heavy concentration.

Western investors are also returning to the market. Physical investment demand is expected to climb to a three-year high in the coming months, providing an additional floor under prices.

Supply Deficit Persists — But the Shape Is Changing

The Silver Institute projects a supply deficit of 46.3 million ounces for 2026, marking the sixth consecutive year that demand outstrips supply. The structural bottleneck is well known: roughly 70% of global silver output comes as a byproduct of copper, lead, and zinc mining, making rapid production increases nearly impossible.

Geopolitical factors are tightening the screws further. China plans to impose export restrictions on sulfuric acid starting in May 2026 — a chemical essential to copper processing and, by extension, silver production. Key importing nations like Chile and Indonesia could face supply disruptions. Shipping risks in the Strait of Hormuz are also threatening sulfur deliveries from the Middle East.

The broader market deficit is even larger than the Silver Institute’s headline figure suggests. Analysts estimate that 67 million ounces will need to be drawn from existing inventories this year to balance supply and demand.

The $80 Resistance Wall

Chart watchers see a clear hurdle ahead. Silver needs to break sustainably above the $80 resistance level to confirm a bullish reversal. If it does, the recent intermediate high comes into play as the next target.

J.P. Morgan Global Research remains constructive on the metal’s trajectory, forecasting an average price of $81 per ounce for 2026 — roughly 10% above current levels. Whether that target materializes hinges on two variables: how quickly new technology applications can offset the solar demand decline, and whether the Fed eventually pivots away from its restrictive stance. For now, silver is balancing on a wire, with supply scarcity pulling one way and monetary policy pulling the other.