Silver’s Steep Decline Obscures a Tighter Market: COMEX Delivery Test Looms

Silver plunges 8.3% after strong US jobs data, but a massive gap between open interest and registered COMEX inventories raises supply concerns. CPI and Fed meeting loom.

Silver enters a pivotal week battered by an 8.3% single-day rout on Friday, but beneath the surface lies a potentially more consequential story: the interplay between surging macro headwinds and dwindling physical inventories at the COMEX. The metal closed at $67.96 per ounce, its lowest in weeks, after a blockbuster US jobs report vaporized hopes for near-term rate cuts. Yet even as traders slashed positions, the July COMEX contract — one of the major delivery months — is carrying open interest of over 70,000 contracts, representing roughly 355 million ounces of silver. Against that, registered COMEX inventories stand at just 84 million ounces, a gap that has analysts scrutinizing the delivery process.

The catalyst for the sell-off was unmistakable. The US economy added 172,000 new jobs in May, nearly double the 85,000 that economists had penciled in. That forced the market to reprice the probability of a Federal Reserve rate hike this year to around 30%, according to the CME Group. Higher real interest rates are a headwind for non-yielding assets like silver, and the dollar’s strength — the dollar index is hovering near 100 — adds another layer of pressure. The 10-year Treasury yield responded by climbing, triggering a wave of speculative liquidation.

But the macro picture is not monolithic. All eyes now turn to Wednesday’s US consumer price index for May, due at 8:30 ET. The April reading clocked in at 3.8%, the highest since May 2023, with energy prices contributing over 40% of the monthly increase. Any further acceleration would severely crimp the room for dovish Fed narratives and likely deepen silver’s losses. Conversely, a softer number could provide the beleaguered metal with a near-term lifeline. The Fed’s policy meeting on June 16-17 follows immediately, making this week a critical two-step for monetary policy expectations.

Beyond the macro calendar, the structural supply picture remains stubbornly tight. The silver market is heading into its sixth consecutive year of deficit, with industrial demand — dominated by solar module manufacturing, which consumes 230 million ounces annually — continuing to outpace stagnant mine production. COMEX registered inventories have shrunk by roughly 70% since 2020, and London Bullion Market Association vaults also report significant outflows. Should investment demand rebound, the physical shortage could catalyze violent price swings.

The gold-to-silver ratio, currently at 63, offers little clear direction, sitting in a historically neutral zone between 40 and 80. But with the ratio having recovered from a low of 43, it suggests silver has underperformed gold in recent months. Meanwhile, technical indicators flash mixed signals: the relative strength index at 35.3 points to oversold conditions, yet the price sits 44% below its 52-week high of $121.78 and nearly 11% below its 50-day moving average of $76.37. A support zone around $65 is now in focus; reclaiming $70 would offer a near-term stabilization.

Despite the recent drubbing, major bank forecasts remain well above spot prices. J.P. Morgan sees silver averaging $81 an ounce in 2026, while a Reuters poll puts the 2026 average around $79.50. UBS projects $85 by the end of June and September, easing to $80 by December. These projections reflect the persistent deficit but also acknowledge that short-term macro headwinds — particularly dollar strength and rate expectations — can overwhelm fundamentals for extended periods.

The rest of the week brings additional data points: US producer prices on Thursday alongside weekly jobless claims and the ECB meeting, followed by the University of Michigan consumer sentiment survey on Friday. Each will add nuance to the rate outlook. For silver, the tension between a hawkish macro environment and a tightening physical market is unlikely to resolve quickly, but the next few days could set the tone for weeks to come.