Silver’s AI Boom Collides With Fed Hawks as Jobs Data Looms

Silver faces pivotal week as AI-driven industrial demand clashes with hawkish Fed; May jobs report to decide short-term direction amid supply deficit.

Silver enters a pivotal week caught between two powerful forces: a surge in industrial consumption from artificial-intelligence infrastructure and a hawkish Federal Reserve that could slam the brakes on any rally. The May US jobs report, due Friday, will serve as the decisive catalyst.

The metal has already been through a rough patch. After hitting an all-time high of $120 an ounce in late January 2026, silver corrected sharply and now trades in the mid-$70s. July futures eased to $73.08 on Thursday morning. Over the past month, the price inched up roughly 0.81%, but the year-on-year gain still stands at an eye-popping 112%.

AI Infrastructure Gobbles Up Silver

Behind that industrial demand resurgence lies an unlikely driver: artificial intelligence. Every major data center relies on silver for its conductivity. A standard server rack consumes around 15 kilowatts of power, but a modern AI training rack can burn through as much as 130 kilowatts. That makes silver technically irreplaceable in the wiring and connectors.

Global industrial demand already runs at roughly 750 million troy ounces annually. The AI buildout alone now accounts for 30 million ounces, and that segment is growing at about 20% per year. The Silver Institute expects further gains from the technology sector through 2030.

Supply Squeeze Offers a Floor

That rising demand meets an immovable object on the supply side. The silver market has been locked in a structural deficit for years: the world simply consumes more than the mines produce. Boosting output is no quick fix. Roughly 80% of global silver is extracted as a byproduct of zinc, lead or copper mining, meaning production responds only with a multi-year lag to price signals.

This chronic shortage provides a solid long-term foundation for prices, but short-term direction depends on macro policy. And that is where the jobs report enters.

Geopolitics Heats Up Inflation Fears

Adding to the uncertainty, tensions in the Middle East continue to keep energy prices elevated. The near-complete closure of the Strait of Hormuz — the worst escalation since a ceasefire in April — has stoked inflation worries. Cleveland Fed President Beth Hammack warned that if price pressures keep rising, the central bank may need to hike rates again. Even if the waterway reopened immediately, oil supplies would remain critically low for months.

Those fears feed directly into the Fed’s calculus. The central bank has held its key rate at 3.5% to 3.75% for three straight meetings, but the last vote was the first since October 1992 with four dissenting members. J.P. Morgan sees the Fed on hold for the rest of the year, with any move — a 25-basis-point hike — not expected before the third quarter of 2027.

Jobs Data as a Litmus Test

The May nonfarm-payrolls report is the last major data point before new Fed chair Kevin Warsh holds his first rate-setting meeting. After two months of triple-digit job gains, the economy added 115,000 positions in April, down from 178,000 in March. Private-sector payrolls for May came in at 122,000, topping economists’ forecasts.

A stronger-than-expected headline number on Friday could reignite debate about a rate hike or reinforce arguments for prolonged quantitative tightening — a theme Warsh already highlighted during his confirmation hearing. A weaker print would fuel hopes for a pause.

Warsh’s arrival also marks a break from the forward-guidance era under Jerome Powell. His approach is seen as less predictable, with less communication and a sharper focus on the balance sheet. That means any single report — especially the May jobs data — carries outsized weight for silver.

Analysts remain cautiously bullish on the medium term. A Reuters survey pegs the average silver price in 2026 at $79.50 an ounce. Goldman Sachs is more aggressive, projecting a range of $85 to $100, driven by the energy transition and industrial demand. But for now, the metal’s next move hinges on whether the jobs report tilts the Fed dial toward tightening or restraint.