Silver's Volatile Week: Inflation Shock and Tariff Twist Overshadow Structural Deficit

Silver crashes over 10% intraday to $76 but closes at $84 amid hotter US inflation, rate hike probability, India tariff hike, and reduced deficit forecast.

Silver investors were whipsawed through a brutal session on Friday, with the metal plunging more than 10% to $76.34 an ounce at one point before staging a partial recovery. The closing price of $84.06 still represented a 4.64% single-day rout, yet the weekly performance remained positive — a testament to the extreme volatility gripping markets in 2026. Since the start of the year, silver has still managed to gain over 16%, but that headline masks the ferocity of the latest selloff, which has now carved about a third off the record high reached in January.

The trigger was a hotter-than-expected US inflation print. Consumer prices rose 3.8% year-on-year in April, while producer prices recorded their sharpest monthly increase since early 2022. The data vaporised remaining hopes for a Federal Reserve rate cut: the probability of a June move collapsed to under 8% within hours. Markets have now fully priced out any easing this year, and the probability of a rate hike by December is around 30%. A stronger dollar followed, delivering the classic headwind for precious metals.

Two additional shocks amplified the pressure from opposite sides of the supply-demand equation. UBS slashed its global silver deficit forecast from 300 million ounces to just 70 million ounces for the current year, citing weaker demand from the photovoltaic industry as well as declines in jewellery and silverware, combined with stable mine output and investor outflows from exchange-traded funds. Meanwhile, India raised import tariffs on gold and silver from 6% to 15% in a bid to support the struggling rupee and narrow its trade deficit. Indian silver imports could drop by as much as 20% in the short term, hitting a market that structurally relies on sustained demand from Asia.

On the industrial front, the picture is more nuanced. About half of global silver consumption comes from industrial applications, and solar panel manufacturers are actively reducing the silver content per unit — a trend that pressures near-term demand. Yet the Silver Institute still expects total industrial offtake to exceed 700 million ounces annually by 2030, which would widen the supply deficit further if mine output remains stable. The metal is on track for its sixth consecutive annual deficit in 2026, with analysts estimating a gap of around 46 million fine ounces, roughly 15% larger than the previous year.

The geopolitical backdrop adds another layer of complexity. The ongoing closure of the Strait of Hormuz, linked to the Iran conflict, keeps upward pressure on US producer prices and ensures that inflation remains sticky — a force that simultaneously supports commodities and forces central banks to maintain a restrictive stance. This uncertainty is reflected in the unusually wide dispersion of bank forecasts. J.P. Morgan sees silver averaging $81 this year, Goldman Sachs ranges from $85 to $100, and Citigroup goes as high as $110.

Technically, silver is testing critical support. The 100-day moving average sits at $82.70, and the 50-day average at $77.22 provides the next safety net. On the upside, $85 remains the key hurdle; a weekly close above that level would signal renewed bullish conviction. All eyes now turn to the Federal Reserve's next policy meeting on June 16–17, where the updated dot plot will define the interest-rate trajectory for the rest of the year. Until then, silver looks set to remain one of the most sensitive barometers of global risk appetite, caught between a stubborn deficit narrative and powerful macro headwinds.