Federal Reserve Dominance Weighs on Silver Prices

Silver prices have been fluctuating due to conflicting market forces, with a structural supply deficit struggling to overcome the Federal Reserve's restrictive monetary policy. The metal closed at $58.49 per ounce on Friday, clawing back above the psychologically important $58 threshold after a 0.99% gain.

The Silver Institute projects a sixth consecutive global supply deficit in 2026, with an estimated shortfall of around 46.3 million ounces. Industrial demand now accounts for more than 55% of total consumption, driven by AI infrastructure, photovoltaic manufacturing, and automotive electrification.

However, the market is not behaving as expected due to the Fed's hawkish stance. With a probability of another rate hike in September standing at 82.1%, higher interest rates are boosting the dollar and raising the opportunity cost of holding non-yielding assets like silver.