Silver Seeks Stability After Sharp Sell-Off

Silver faces a multi-year structural deficit as industrial demand soars. Major banks raise price targets despite Fed delays, with supply unable to keep pace.

Following a dramatic plunge that rattled investors, the silver market is attempting to find its footing. The precious metal's price is now consolidating within a tense geopolitical landscape, bringing a profound structural supply issue into sharp relief—a challenge set to define the market for years.

Physical Shortage Meets Unprecedented Industrial Demand

Beyond the daily noise of interest rate speculation, robust fundamental factors are providing underlying support for silver. The global market is heading toward its fifth consecutive annual supply deficit. From 2021 through 2026, the cumulative shortfall is projected to reach a staggering 820 million ounces. A clear warning comes from COMEX exchange inventories, which have plummeted by more than 70% since 2020.

Industrial consumption is absorbing available material at a record pace. The photovoltaic sector alone uses over 230 million ounces annually. This demand is compounded by the expansion of electric mobility, where each vehicle can require up to 50 grams of silver. Compounding the problem, approximately 70% of global silver production occurs merely as a by-product of mining for other metals. This makes it exceedingly difficult to ramp up supply quickly, especially as ore grades decline.

Geopolitical Tensions Delay Monetary Easing

Currently, the spot price is oscillating around the $85 per troy ounce level. The effective closure of the Strait of Hormuz is driving oil prices higher and reigniting worldwide inflation concerns. Consequently, market observers now anticipate that the U.S. Federal Reserve will hold interest rates steady at its upcoming meeting. Expected rate cuts are likely postponed until September at the earliest, a dynamic that strengthens the U.S. dollar and acts as a near-term cap on rapid silver price appreciation.

This period of consolidation follows extreme volatility. In late January, silver skyrocketed to an all-time high above $116, only to undergo a severe correction that pushed it to around $71 by early February—a drop of nearly 40% within a week.

Major Banks Revise Forecasts Upward

This tight physical supply picture is forcing major financial institutions to recalibrate their price models. Despite the extreme volatility witnessed earlier this year, the medium-term outlook remains positive:

• J.P. Morgan has raised its 2026 average annual price target from $56.30 to $81.
• Deutsche Bank analysts forecast a potential rise to $100 by the end of this year.

Experts at Deutsche Bank specifically note that silver often exhibits stronger momentum than gold during the later stages of a precious metals bull market.

For a sustained breakout above current consolidation levels, clearer signals from central banks on monetary policy will be required. Barring an unexpectedly hawkish pivot from the Fed, the downside risk following the recent sharp correction appears limited. The unresolved structural supply deficit forms a substantial foundation that should cushion against any deep price declines in the foreseeable future.