Triple-Leveraged Silver ETC Stumbles After Split as Inflation and Industrial Headwinds Mount

Silver bullion nears $88; leveraged ETC falls 6% on hot CPI data raising rate hike odds. Supply deficit persists but industrial demand and India duties weigh.

Silver bullion charged to a two-month high near $88 an ounce on Wednesday, yet the WisdomTree Silver 3x Daily Leveraged ETC went in the opposite direction. The triple-leveraged product tumbled nearly 6 percent to $24.50 shortly after executing a stock split designed to improve tradability. The catalyst was a hotter-than-expected U.S. inflation report that scrambled expectations for Federal Reserve policy.

Consumer prices rose 3.8 percent year-on-year in April, the sharpest annual increase in three years. Markets quickly repriced the odds of a rate cut this year, with the CME Group’s FedWatch Tool now assigning a 30 percent probability of a hike by December. The Fed itself remains deeply divided — four members dissented when the central bank held rates steady at its late-April meeting, the highest number of dissenters at a single gathering since 1992. Morgan Stanley has pushed its projected first rate cut out to 2027, a scenario that typically weighs on non-yielding assets such as silver.

Two distinct forces are now pulling the metal in opposite directions. On the supply side, the deficit shows no sign of narrowing. The Silver Institute forecasts a sixth consecutive annual shortfall in 2025, with the gap exceeding 46 million ounces. In 2024 the deficit stood at roughly 40 million ounces. Falling ore grades and a lack of new mine projects continue to constrain output, giving analysts reason to hold a cautiously optimistic view. J.P. Morgan sees silver averaging $81 for the year, while UBS recently trimmed its year-end target from $85 to $80. Goldman Sachs is more bullish, penciling in a range of $85 to $100.

Yet industrial demand — which accounts for a growing share of silver consumption — is turning soft. Solar manufacturers, a key source of demand growth in recent years, are reducing the amount of silver used in each cell. BloombergNEF expects a 7 percent drop in the segment’s silver consumption this year, following a 6 percent decline in 2024. A more drastic shift is under way at Longi Green Energy, which plans to replace silver entirely with base metals such as copper starting in the second quarter. Industry forecasts call for an additional 19 percent contraction in photovoltaic-related silver demand by 2026.

Geopolitical and trade developments add further complexity. India, the world’s largest silver importer, has jacked up import duties from 6 percent to 15 percent, a move that could curb buying appetite. Meanwhile, the unresolved U.S.-Iran standoff and the scheduled May 15 meeting between Donald Trump and Xi Jinping are keeping traders on edge; a breakthrough in trade talks could revive industrial demand while easing inflationary pressure.

For holders of the WisdomTree Silver 3x Daily Leveraged ETC, the daily reset mechanism remains the dominant risk. The product rebalances its leverage every session, meaning that daily swings of more than 11 percent — the expected daily volatility — can rapidly compound gains or losses. The high volatility that has come to define the silver market is likely to persist as long as the Fed keeps rates elevated. A small bit of relief is on the horizon: as of September 1, BNP Paribas’ swap fee will be nearly halved, lowering the effective holding cost for investors who keep positions open longer. The expense ratio stays at 0.99 percent, but the structural drag from daily leverage will continue to dominate returns in this choppy environment. A weaker dollar, a cooler inflation print, or a less restrictive central bank would be needed to give the fund a lasting upward push.