Silver’s Price Plunge Masks a Supply Squeeze: Jobs Data Resets Rate Expectations as Deficits Widen

Strong US jobs report crushes rate cut expectations, sending silver down 10% weekly. Technical breakdown below key moving average, ETF outflows accelerate, yet physical deficit persists.

Silver’s dual identity—as both a high-octane industrial metal and a rate-sensitive monetary asset—was laid bare last week when a blistering US jobs report triggered a rout that erased more than 8% on Friday alone. The precious metal closed at $67.96 per ounce, capping a weekly loss of roughly 10%. Yet beneath the selling frenzy lies a market that is structurally starved of metal, raising the question of whether the short-term macro shock is obscuring a longer-term supply deficit.

Jobs shock dashes rate-cut hopes

The catalyst was unmistakable. The US economy added 172,000 new jobs in May, nearly twice what analysts had expected, while the unemployment rate held steady at 4.3%. Solid wage growth alongside the robust headline all but extinguishes hopes for an early rate cut from the Federal Reserve. For zero-yielding silver, higher interest rates mean higher opportunity costs—a toxic backdrop that sent yields on 10-year US Treasuries surging above 4.5% and propelled the dollar index through the psychologically important 100 mark.

The macro headwinds did not stop there. Geopolitical tensions in the Middle East added an extra layer of uncertainty. US signals pointing to a late stage in ceasefire talks were flatly contradicted by Iran’s foreign minister, and the heightened nervousness near the Strait of Hormuz kept traders on edge. But unlike gold, which often benefits from such turmoil, silver’s industrial sensitivity meant it bore the full brunt of the rate repricing.

Technical damage deepens

The sell-off drove silver decisively below its 50-day moving average of $76.37, a level it had already been flirting with. From the all-time high of nearly $122 hit in January, the metal has now surrendered roughly 44% of its value. Chartists are watching the next support zone between $65 and $66, a break of which could open the door to a rapid slide toward $60. The secondary support band cited by analysts runs from $65 to $68.

A key event on the near-term calendar is the June 10 release of US consumer price data. A hotter-than-expected inflation reading could ignite another wave of selling. The following week’s Federal Open Market Committee meeting will provide additional clarity on the trajectory of monetary policy, which remains the dominant driver of price action for now.

Physical ETF outflows accelerate

The sell-off was not confined to futures markets. The iShares Silver Trust, the world’s largest physically backed silver ETF, recorded net outflows of roughly 17 tonnes over the period, reducing its total holdings to around 15,000 tonnes. Institutional investors appear to be pulling capital, adding to the selling pressure. Silver’s historically higher volatility relative to gold—driven by its industrial component—has amplified the move.

Structural deficit remains the wild card

But for all the short-term gloom, the physical market tells a different story. The silver market is headed for its sixth consecutive annual deficit. Global inventories are shrinking, and roughly 70% of mine production comes as a by-product of copper or zinc mining, meaning supply barely reacts to higher silver prices. Meanwhile, industrial demand is surging: photovoltaics, electric vehicles, and now AI hardware are all dependent on silver’s unmatched conductivity.

The Silver Institute projects a major jump in physical silver investment in the years ahead. By 2026, investment demand is expected to rise by a fifth, reaching a volume of 227 million ounces. This structural tailwind stands in stark contrast to the cyclical weakness inflicted by the Fed. The market is thus caught between two opposing forces—a macro headwind that punishes the metal in the short run, and a supply deficit that argues for much higher prices over time. Which force wins will depend on how the next round of economic data shifts the rate calculus.