Silver Plummets Despite 6 Consecutive Years of Supply Shortage...Warning of Further Drop to $50.70

▲ Silver / AI-generated image

Despite a supply shortage of 46.3 million troy ounces, Silver broke through a descending triangle and dropped, making the defense of $57.53 the first bearish test for the commodity market in July.

According to FXLeaders, a specialized foreign exchange and commodity media outlet, on July 3 (local time), silver traded below several moving averages amidst liquidation pressure from commercial players. The price fell to around $57.53 per troy ounce. A re-evaluation of prices across precious metals is underway as geopolitical premiums disappear.

The Islamabad Memorandum of Understanding (US-Iran MoU), a temporary peace agreement between the US and Iran, also acted as downward pressure. The agreement was signed in Switzerland on June 19. After the reopening of the Strait of Hormuz, commercial shipping capacity recovered to about 85% of the seasonal average. Brent crude front-month futures fell below $73 per barrel.

The Federal Reserve's (Fed) tightening stance also suppressed attempts at a rebound. Kevin Warsh, former Federal Reserve Governor, emphasized the Fed's political independence at the European Central Bank Forum in Sintra, Portugal, on July 1. He drew a line against expectations of early interest rate cuts. May's inflation rate was presented at 4.2%, and traders are abandoning expectations of autumn rate cuts, even factoring in the possibility of an October rate hike.

Physical supply and demand remain tight. According to The Silver Institute's World Silver Survey 2026, the silver market is expected to continue its physical supply deficit for the sixth consecutive year. The deficit for 2026 is projected to be 46.3 million troy ounces. The structure where 72% of global mine production relies on copper, zinc, and lead by-products also makes supply response difficult.

However, slowing industrial demand strengthened the short-term bearish argument. The intensity of silver use in the solar industry is estimated to have decreased by 19% year-on-year. Silver consumption in the solar sector is expected to drop to 151 million ounces this year. Demand from AI data centers, power grids, and automobiles remains a long-term structural support.

On the 4-hour chart, a break below the descending triangle's lower boundary was confirmed. Silver is significantly below its 200-period exponential moving average of $65.89. The Relative Strength Index (RSI) remained in bearish territory at 41.91. The Moving Average Convergence Divergence (MACD) is below the 0 line on the 4-hour chart. FXLeaders suggested that selling pressure could continue until $59.06 is recovered, presenting lower target zones of $55.61 and $53.11, and a long-term downside target of $50.70.

[Article Summary]

-Silver fell to $57.53 per troy ounce, breaking below the lower boundary of the descending triangle.

-The silver market is projected to have a 46.3 million troy ounce supply deficit in 2026, but Fed tightening and slowing industrial demand are pressuring short-term prices.

-FXLeaders analyzed that $55.61, $53.11, and $50.70 could be open as downside targets until $59.06 is recovered.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*