During the Asian trading session on Tuesday, silver opened with gains, initially rising over 1% to $75.88 per ounce before pulling back, currently trading near $75. The price of silver has been consolidating around the $75 level for multiple sessions since its decline from $89.34 per ounce in mid-May.
The Underlying Supply Crisis
Beneath the apparent stagnation near $75, the physical market is experiencing an unprecedented supply crisis. Data shows that since October 2025, COMEX silver inventories have been halved, with delivery demand in Q1 2026 alone reaching 165 million ounces. Full-year deliveries surged from 203 million ounces in 2024 to 474 million ounces in 2025, indicating explosive growth.
A critical factor is that Western futures markets (COMEX/LBMA), which have long artificially suppressed silver prices primarily through cash-settled paper contracts, are seeing their exchange inventories rapidly depleted by the surge in physical delivery demand. Eric Sprott, founder of Sprott Asset Management, warned that the ability of Western futures exchanges to suppress silver prices through paper settlement is rapidly diminishing.
Industrial Demand Surge and Asian Premiums
Industrial demand for silver is in a phase of broad-based expansion. Demand from applications like AI data centers, electric vehicles, solar panels, smartphones, and humanoid robots is surging.
Industrial demand now accounts for over 50% of total silver demand, with the photovoltaic (PV) sector comprising more than 55% of that. N-type cell technologies (TOPCon, HJT, etc.) use 15%-30% more silver per watt than traditional cells. Silver usage in a new energy vehicle is approximately seven times that of a traditional internal combustion engine vehicle. AI servers use about 30% more silver than traditional models. Major industrial users like Samsung have begun transacting directly with silver mines at significant premiums, bypassing third-party dealers, further reducing available supply for COMEX.
Interest Rate Environment Reshapes the Narrative
From a financial perspective, the persistent expectations of Federal Reserve rate hikes present a clear near-term headwind for silver. The transmission path is direct: a rising 10-year U.S. Treasury yield increases the opportunity cost of holding non-yielding assets like silver, prompting institutional investors to reduce holdings. Simultaneously, a stronger U.S. dollar raises purchasing costs for non-U.S. buyers, dampening physical demand.
In mid-May, the 10-year Treasury yield briefly surpassed 4.68%, while the 30-year yield surged above 5.2%, both reaching their highest levels since the subprime mortgage crisis. This shift in the interest rate environment is reshaping the short-term pricing logic for silver.
Institutional Perspectives
UBS revised its price targets downward, lowering the end-June target from $100 to $85. Targets for September and December were also cut to $85 and $80, respectively, with a further reduction to $75 for March 2027.
UBS expects the silver market deficit in 2026 to narrow significantly to approximately 60-70 million ounces, down from a previous estimate of around 300 million ounces. This is attributed to high prices leading PV manufacturers to reduce silver loadings, suppressed demand for silver jewelry and silverware, and a slight increase in mine supply. UBS strategists suggest that with a smaller expected deficit, silver is likely to trade roughly sideways.
Bank of America believes silver still has short-term potential to breach $100 per ounce, especially against a backdrop of continued gold strength, but the foundation for such a rally is becoming increasingly fragile. The bank's analysts forecast a price retreat to around $75 by the second quarter of 2027.
Bank of America's core concern is that high prices are forcing the PV industry to systematically reduce silver usage or switch to alternative metals. The bank judges that silver demand from photovoltaics may have already peaked in 2025. Should industrial demand continue to weaken, even moderate selling by financial investors could be enough to push the market into a physical surplus.
Technical Outlook
On the daily chart, spot silver is in a broad range-bound pattern, currently trading near $75. The price faces resistance from the 20-day and 50-day moving averages (MAs), which provide immediate pressure at $78.26 and $76.04, respectively. However, solid support is established from below by the 200-day MA, limiting the potential for a significant medium-term decline.
Since retreating from the previous high of $89.34, the market has consolidated, trading repeatedly within a $71-$78 range. The previous lows at $60.96 and $63.92, along with the 200-day MA, form a key medium-to-long-term support zone, while $89.34 remains a strong resistance level.
On the indicator front, the RSI at 46.44 is below the 50 midline, indicating balanced momentum without extreme overbought or oversold conditions. The KDJ indicator has formed a bullish crossover at low levels, suggesting potential for a minor short-term rebound. However, with the indicator positioned in the mid-range, any rebound is likely to be limited and unlikely to quickly break through the short-term MA resistance.
In summary, there is an expectation for a minor corrective rebound in the short term, with primary resistance concentrated in the $76 to $78.3 area. After testing this resistance, prices are likely to revert to consolidation. The medium-term outlook suggests the market will maintain its broad $67-$89 trading range, with solid underlying support. Without a major fundamental catalyst, a sustained directional trend is unlikely to emerge in the near term. On any pullback, the effectiveness of support at $74 and $70 will be key levels to watch.
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