Silver's 6.3% Plunge Leaves Bulls Without a Floor as Vaults Fill and Solar Demand Fades

Silver's spot price settled at 49.14 USD per troy ounce yesterday, a single-session loss of 6.3% that laid bare how exposed the metal has become to a tightening policy outlook and a physical market that is suddenly far better supplied than it was a year ago.

The sell-off did not stem from one source. Reuters reported that firmer oil prices and persistent US inflation worries amplified the retreat. September inflation data showed acceleration, and economic growth came in stronger than expected — a combination that, alongside higher energy costs, fed market expectations of a possible Federal Reserve rate hike in December. For a metal that pays no yield, the prospect of a more restrictive Fed erodes its appeal, and media reports pointed to exactly that pressure. The inflation trajectory matters less than what the central bank might do about it.

Equity markets may have added fuel. Reuters noted that the technology-driven rout could have triggered additional selling in precious metals, though that link is a possible amplifier of the decline rather than a confirmed sole cause. Some of the selling, according to media reports, may also have been investors raising liquidity — moves that say little about silver's longer-term prospects but can sharpen short-term pressure.

Technical indicators offered no sign of a break in the selling wave as of today, and Mirae Asset Sharekhan warned yesterday that the metal could extend losses toward 48 USD per troy ounce. The research house drew an explicit distinction between time horizons: further near-term weakness is possible, while lower levels look attractive over the medium and long term. That view is not a call that a bottom has formed — it describes the tension between unrelenting selling pressure and what may be a more favorable long-term entry point.

London's vaults are carrying far more metal

The supply side of the physical market has loosened at the same time. Figures released yesterday by Metals Focus put London silver stocks at 932 million troy ounces at the end of September, the highest level in almost four years. Excluding metal held in physically backed exchange-traded products, roughly 267 million ounces were available — nearly double the low reached in October 2025. Holdings in silver-backed ETPs have fallen by around 60 million ounces since the start of the year.

That outflow matters mechanically: metal previously locked inside investment products has returned to the market. Metals Focus cites the improved availability itself as a drag on silver, which means the retreat cannot be reduced to the rate debate alone. Higher rate expectations weigh on investment demand, while more freely available metal weakens the scarcity argument that had supported prices.

Solar's pullback undercuts the deficit case

Industrial demand is offering no clean counterweight either. The World Silver Survey forecasts a 3% decline in industrial silver demand for 2026, with solar demand expected to fall by roughly 19%. Manufacturers are cutting their silver consumption, and the squeeze lands precisely on the segment that has driven industrial offtake. An expected supply deficit, in other words, does not automatically translate into a higher price in the near term.

A sixth consecutive annual supply deficit is still projected for 2026. Market observers, however, also expect the gap between supply and demand to narrow — so what counts for investors is not merely that a deficit exists, but how it evolves.

A December hike is priced, not decided

Today's published market assessment puts the probability of a US rate increase in December at 70–80%. That is a long way from a done deal. As long as expectations of tighter policy dominate, any recovery remains fragile; higher real yields and inflation worries have been among the heaviest weights on the metal of late.

None of this year's forecasts contradicts the possibility of further short-term losses. A durable rebound would first require the selling pressure to ease and rate anxieties to recede. A lower price on its own provides no evidence that either has happened.