Silver’s $70.42 Standoff: A Ceasefire, a Hawkish Fed Debut, and a Solar Tectonic Shift

Silver trades near $70 as a US-Iran peace deal eases inflation fears, but a hawkish Fed under Warsh and falling solar demand complicate the outlook amid structural deficits.

Silver is trading at $70.42 an ounce, a level that masks a tug-of-war between geopolitical easing and a newly hawkish Federal Reserve. A US-Iran peace pact has defused the energy price shock that drove inflation higher, but Kevin Warsh’s first meeting as Fed chair has reintroduced rate-hike jitters. Beneath the surface, a structural supply deficit and a looming drop in solar demand are reshaping the fundamental picture.

Warsh’s Dot Plot Delivers a Hawkish Jolt

The Fed left the benchmark rate unchanged at 3.5% to 3.75% at its June meeting, but the tone shifted decisively. Nine of the 18 Federal Open Market Committee members now expect the fed funds rate to end 2026 above the current target band. The median dot plot projection jumped to 3.8% from 3.4% in March. Warsh also removed the previous easing bias from the policy statement, a clear signal that rate cuts are off the table for now.

The Fed’s inflation forecast for 2026 was raised sharply to 3.6% from 2.7% three months earlier, driven by a 23.5% year-over-year surge in energy prices in May — a direct consequence of the now-contested US-Iran conflict. The CME FedWatch Tool now assigns a 42.2% probability to a rate hike before year-end.

The Iran Deal Brings Relief, But Not Yet Certainty

At the start of the week, silver briefly pushed toward $71 after the US and Iran agreed to a peace framework aimed at reopening the Strait of Hormuz and normalizing oil flows. Crude prices tumbled to a two-month low. The formal signing is scheduled for June 19 in Switzerland and includes lifting blockades, easing sanctions, and dismantling parts of Iran’s nuclear program.

The deal is not fully sealed. Mine clearance in the strait and restoring disrupted supply chains will take considerable time. For silver, the implications are clear: sustainably lower energy prices would remove a major inflation driver, relieving pressure on real rates and capping the downside for the precious metal.

Solar Demand Takes a Step Back

While geopolitical tailwinds improve the inflation outlook, a structural shift is underway in a key consumption sector. The solar industry used 186.6 million ounces of silver in the most recent period, but that figure is projected to fall to roughly 151 million ounces in 2026 — a decline of 19%.

Chinese manufacturers are leading a push to substitute silver with copper. Longi Green Energy plans to start volume production of copper-based back contact cells in the second quarter of 2026. Jinko Solar has announced a similar switch, and Shanghai Aiko Solar has already launched silver-free cells.

Substitution has limits. Copper raises assembly costs and reliability concerns. TOPCon cells, which require high-temperature processing, remain dependent on silver. High-efficiency solar designs will continue to need the metal, even as overall demand retreats.

Structural Deficit Keeps the Foundation Firm

Irrespective of near-term demand swings, the physical market remains in a persistent shortage. The Silver Institute forecasts a sixth consecutive supply deficit in 2026, at 46.3 million ounces, up from 40.3 million in 2025. Since 2021, cumulative above-ground inventory drawdowns have reached 762.1 million ounces.

Expanding supply is not straightforward. Most silver is produced as a byproduct of copper, zinc, and lead mining. Industrial demand from renewable energy, electric vehicles, electronics, and AI infrastructure continues to grow, offsetting the solar slowdown.

Silver rose 9.9% from the prior week’s opening price through Wednesday. It remains down roughly 9% on a monthly basis but has still gained about 91% over the past year. The structural deficit should sustain that long-term momentum — as long as the peace process keeps energy inflation in check and the Fed refrains from an abrupt policy reversal.