Silver’s 44% Tumble Puts Structural Deficit in the Shade as Jobs Shock Fuels December Rate Hike Bets

A blockbuster US jobs report has shattered any lingering hopes of near-term monetary easing, sending silver spiraling deeper into bear territory. The metal’s dual identity as both a safe-haven and industrial commodity is proving a liability, as hawkish Fed expectations and a strengthening dollar overwhelm the narrative of a tightening physical market.

Spot silver settled near $67.75 an ounce on Saturday, extending its slide to roughly 44% from the January high of $121.64. By Monday it had edged slightly lower to $67.70, shedding more than 2% on the session and bringing the weekly rout to nearly 10%. The year-to-date decline now stands at about 6%, with the metal trading more than 44% below its 52-week peak of $121.78 reached at the end of January.

The catalyst was a much stronger-than-expected US employment report. Non-farm payrolls increased by 172,000 in May, nearly double the 85,000 forecast. Wage growth also accelerated, reinforcing fears that the Federal Reserve will keep rates elevated or even raise them again. Market pricing now implies a 70% probability of a rate hike in December. Higher yields and a firm US dollar make non-yielding assets like silver less attractive, especially for buyers outside the dollar bloc.

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A notable anomaly is the absence of a geopolitical premium. Despite renewed tensions in the Middle East – Iranian rocket attacks and rising oil prices – silver has failed to attract safe-haven flows. The metal’s industrial component, which accounts for 57% of global demand, is weighing heavily. In periods of economic uncertainty, industrial users cut back on consumption, and high prices have already spurred substitution and efficiency gains in sectors such as photovoltaics, electronics and electric vehicles. The Silver Institute projects industrial demand will slip 3% to 657.4 million ounces in 2026.

Yet the physical market tells a different story. The industry body expects a sixth consecutive structural deficit in 2026, amounting to 46.3 million ounces – a shortfall that must be covered from existing inventories. Private investors are seizing the opportunity: demand for coins and bars is forecast to jump 18%. However, this physical tightness remains overshadowed by macro forces. The relative strength index has dropped to 35, flirting with oversold territory, but no clear catalyst has emerged to trigger a reversal.

China’s role could prove pivotal. The country booked unusually high silver imports early in 2026, driven by industrial demand and investment, notably from the solar sector. If that momentum continues, it would signal that the physical market is more resilient than current prices suggest. A sharp slowdown in Chinese imports, on the other hand, would add another layer of pressure.

For now, the macro headwinds – rising bond yields, a robust dollar, and a Fed leaning hawkish – continue to override both geopolitics and the supply narrative. The structural deficit will only reassert itself as a price driver once inflation data softens and the central bank revises its December rate path. Until then, silver remains trapped between its bearish financial backdrop and its bullish physical fundamentals.

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