Silver Plummets Despite 6 Consecutive Years of Supply Deficit...Warning of Further Plunge to $50.70

▲ Silver/AI generated image

As Silver broke down from a descending triangle despite a 46.3 million troy ounce supply deficit, the defense of $57.53 emerged as the first bearish test for the commodity market in July.

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

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

The Federal Reserve's (Fed) hawkish stance also suppressed attempts at a rebound. On July 1, Kevin Warsh, Chairman of the Federal Reserve, emphasized the Fed's political independence at the European Central Bank Forum in Sintra, Portugal. He drew a line through expectations of early interest rate cuts. The May inflation rate was presented at 4.2%, and traders are abandoning hopes for autumn rate cuts, even pricing 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 at 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 challenging.

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

On the 4-hour chart, a breakdown below the lower boundary of the descending triangle was confirmed. Silver is trading 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 zero line on the 4-hour chart. FXLeaders suggested that selling pressure could continue until a recovery above $59.06, setting lower target zones at $55.61 and $53.11, and a long-term downside target at $50.70.

[Article Summary]

-Silver broke down from the lower boundary of a descending triangle, dropping to $57.53 per troy ounce.

-The silver market is projected to face 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 until a recovery above $59.06, lower targets of $55.61, $53.11, and $50.70 could be in play.

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