Silver Lurches as Jobs Surprise and Supply Squeeze Set Stage for CPI Showdown

Silver traders endured a rollercoaster session on Tuesday as the metal plunged towards $65 per ounce before clawing back to around $68, caught between a hawkish Federal Reserve pivot and an increasingly acute structural deficit. The sharp intraday reversal underscores just how frayed sentiment has become ahead of this week’s US inflation data — the next major catalyst for a market that remains deeply divided between macroeconomic headwinds and a physical shortage that shows no signs of easing.

Payrolls Shocker Reshapes Rate Expectations

The trigger for the latest bout of selling pressure can be traced back to last week’s blockbuster jobs report. Nonfarm payrolls surged by 172,000 in May, more than double the 85,000 that economists had anticipated. The unexpected strength has all but extinguished hopes for near-term rate cuts and has even prompted some speculators to bet on a rate hike before year-end. If Wednesday’s consumer price index confirms the trend — analysts forecast an annual inflation rate of 4.2%, up from 3.8% in April — the Federal Reserve’s room to manoeuvre will shrink further. Rising real yields on government bonds are already eroding the appeal of a zero-yielding asset like silver, and a higher?than?expected CPI reading could trigger a renewed assault on the $65 support zone.

Deficit Deepens Even as Industrial Demand Shifts

Beneath the noise of monetary policy, the physical market remains exceptionally tight. The Silver Institute projects a sixth consecutive annual deficit in 2026, with global demand outrunning supply by roughly 46 million ounces. The primary driver is the relentless expansion of data centres and artificial?intelligence applications, which are guzzling ever larger volumes of the metal.

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Yet one key industrial sector is pulling in the opposite direction. Solar manufacturers, led by Chinese giant Longi Green Energy, are slashing silver usage per cell through new technologies and substituting copper where possible. Forecasts call for a 19% drop in solar?related silver consumption by 2026, leaving a residual demand of 151 million ounces. Overall industrial offtake is expected to ease 2% to about 650 million ounces, while mine output should edge up to 820 million ounces. That modest supply increase, however, is insufficient to close the deficit — and stronger demand from physical?investment channels is partially offsetting the solar slowdown.

Technical Lines and the Ceasefire That Fizzled

On the charts, silver’s short?term momentum is unequivocally weak. The metal is trading well below its 20?day moving average of $73.97, and the $65 area has emerged as a critical floor. A deeper sell?off cannot be ruled out if inflation overshoots, though a sustained recovery above $70 would signal a technical stabilisation.

Tuesday’s attempted bounce was given a brief lift by a geopolitical development: US President Donald Trump brokered a halt in exchanges between Iran and Israel, sending oil prices sharply lower. Cheaper crude tends to ease inflation fears and could, in theory, support silver. But that effect was all but drowned out by the dominant rate?anxiety narrative. A softer dollar also failed to provide any meaningful relief, as the market remained fixated on the Fed’s next move.

All Eyes on CPI and the FOMC

Wednesday sees the release of May’s consumer?price index at 8:30 a.m. Eastern time, followed by producer?price data on Thursday. Both will be crucial in shaping the central bank’s stance when the Federal Open Market Committee delivers its rate decision on June 17. Until then, liquidity is likely to remain thin and volatility elevated. Should the inflation numbers come in cooler than expected, the focus could quickly shift back to the structural deficit — and silver’s fundamental case may reassert itself. But for now, the jobs shock has put the white metal firmly on the defensive.

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