Silver Clings to $76 as Structural Bulls Face Off Against Hawkish Fed and a Cooling Solar Market

Silver eked out a 6% gain in May, but the rally has left the white metal well short of reclaiming its former glory. At Friday’s close of $75.83, the price sat just below its 50-day moving average of $76.09, a benchmark it touched near $76.01 during the session. That level now stands as a decisive test: break through, and bulls have room to run; fail, and the metal remains trapped in a choppy range defined by competing forces.

A supply deficit that refuses to let up

Underpinning the bullish case is a structural supply squeeze now in its sixth consecutive year. The World Silver Survey projects a shortfall of 46.3 million ounces in 2024, driven principally by the solar industry’s voracious appetite for the metal. Bank of America, however, has sounded a cautionary note, warning that solar demand may be softening as elevated prices prompt thrifting. Other growth engines — AI data centres, electric vehicles, and charging infrastructure — are expanding but cannot yet compensate for any decline in the solar sector. Meanwhile, physical investment in coins and bars continues to absorb supply, providing a floor that prevents a steeper retreat.

Macro headwinds blunt the structural story

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Short-term direction, however, is dictated by macroeconomic cross-currents. US inflation remains sticky: the PCE deflator rose 3.8% year-on-year, with the core reading at 3.3% — both above consensus. That keeps the Federal Reserve on a hawkish footing, lifting bond yields and strengthening the dollar. For a zero-yielding asset like silver, the opportunity cost of holding it rises with every rate-hike expectation.

Adding to the drag is a softening US growth picture. First-quarter GDP expanded at just a 1.6% annualised pace, down from the initial estimate of 2.0%, as investment and consumer spending disappointed. That clouds the outlook for industrial demand, a key pillar of silver’s consumption profile.

Geopolitics: a two-way valve

Geopolitical developments added volatility to Friday’s trading. News of a possible US-Iran agreement to extend a ceasefire initially eased inflation fears and pulled silver lower. But reports of attacks near the Strait of Hormuz and an Iranian retaliatory strike against a US base swiftly reversed the mood, reigniting safe-haven flows. The result is a market that reacts to headlines but lacks a clear directional catalyst from the region.

Technical signals point to consolidation

The price action near the 50-day moving average — tested but not breached — reinforces the indecision. The relative strength index stands at 58.9, neither overbought nor oversold, while a negative divergence in the oscillators hints at waning momentum. With annualised volatility clocking in at 57%, traders should brace for further swings. The decisive break may have to wait for the data.

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A jam-packed data calendar

The coming week offers multiple catalysts that could tip the balance. On June 1, the ISM manufacturing index lands, followed by the JOLTS job openings report on June 2 and the services PMI on June 3. The marquee event arrives on June 5: the May US jobs report. Each data point will shape expectations for the Fed’s next move and, by extension, the dollar and Treasury yields — and therefore the path of silver.

For now, the metal remains suspended between a supportive structural deficit and punishing macro headwinds. The 50-day line is the battleground, and the data will decide the outcome.

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