Silver Stalls Near $75.80 as Fed's Hawkish Tilt Counteracts Structural Deficit and New Mine Projects

Silver drops 1.1% after Fed minutes signal higher-for-longer rates; structural deficit continues with new mine projects and geopolitical risks.

Silver ended Friday at $75.81 an ounce, a 1.1% decline on the day, after briefly touching $76.06 earlier in the session. The pullback snapped two days of gains that had lifted the metal by more than 4% combined, highlighting a market torn between industrial tailwinds and a tightening monetary backdrop.

The catalyst for the reversal came from Washington. Minutes of the Federal Open Market Committee's April 28–29 meeting, released on May 20, showed a majority of policymakers still see further rate increases as appropriate if inflation stays persistently above 2%. With the target range held at 3.50%–3.75%, any residual hope for an early easing cycle evaporated. The "higher for longer" narrative pushed real yields and the dollar higher, directly weighing on silver's appeal as a zero-coupon asset.

Supply-Side Progress Offers Little Short-Term Relief

While macro headwinds dominate the tape, the physical pipeline continues to expand. Vizsla Silver's Panuco project in Mexico is expected to produce an average of 17.4 million ounces of silver-equivalent annually over a 9.4-year mine life. Meanwhile, Skeena Gold & Silver's Eskay Creek project in British Columbia has reached 49% completion, with first production scheduled for the second quarter of 2027.

The additional supply comes against a backdrop of a continuing structural deficit. The World Silver Survey 2026, compiled by the Silver Institute and Metals Focus, reported the fifth consecutive annual shortfall in 2025. Total demand slipped 2% to 1,130.6 million ounces, while mine output rose 3% to 846.6 million ounces and recycling added 197.6 million ounces, up 2%. Industrial consumption — the largest demand category — fell 3% to 657.4 million ounces, held back by weaker photovoltaic demand and material savings. Still, artificial intelligence data centers, electronics, and other technology applications provided a floor.

Geopolitical and Policy Cross-Currents

On the macro front, Germany's government plans to boost its raw materials fund by up to 50% to €1.5 billion, aiming to reduce supply-chain reliance on China. The fund could evolve into a sovereign wealth vehicle from 2028. Domestically, the Ifo business climate index rose to 84.9 points in May, above expectations, but Commerzbank economists still expect the German economy to shrink in the second quarter of 2026, and the Bundesbank forecasts stagnation.

Geopolitically, the closure of the Strait of Hormuz since late February continues to strain global logistics. Iran has attempted to regulate passage, while the U.S. and China jointly opposed militarization of the waterway in May. For silver, the risk is two-sided: energy-price spikes could keep inflation sticky and the Fed cautious, but they also bolster the metal's safe-haven appeal.

India added another layer of complexity by raising import duties on gold and silver from 6% to 15%, effectively 18.4% after taxes. Such protectionist measures aim to safeguard foreign-exchange reserves in large importing nations and can drive portfolio shifts between precious metals.

The net effect is a market caught in a narrow range. Silver's industrial linkages — from electronics to solar and AI — provide underlying support, but the Fed's refusal to soften its stance caps any sustained rally. Until fresh inflation or jobs data allow the central bank to ease, a meaningful breakout above recent levels remains elusive.