Silver's Policy Overhang: 72% Rate Hike Probability Crushes Geopolitical Lift and Deficit Support

The probability of a Federal Reserve rate increase by December has climbed to 72%, a shift that is overwhelming silver's traditional safe-haven appeal and leaving the metal trading near $67.50 an ounce. A robust US jobs report has reset expectations for monetary tightening, pushing bond yields higher and strengthening the dollar — a toxic combination for an asset that generates no income. Spot silver was quoted at $67.47 per troy ounce on Monday, down 0.5%, while gold and other precious metals also eased.

Geopolitical tensions in the Middle East failed to provide the usual crisis premium. Israeli strikes on military targets in western and central Iran sent crude oil prices surging by more than $4 a barrel, yet silver barely flinched. The metal's dual identity as both a precious and industrial commodity explains the disconnect: in periods of economic uncertainty, the industrial side acts as a drag, while rising financing costs and opportunity costs from higher yields dominate trading flows. The dollar's firmness adds further pressure for buyers outside the US.

Technically, the market is approaching oversold territory. The relative strength index stands at 35, but a clear catalyst for a reversal remains elusive. Silver has retreated more than 44% from its 52-week high of $121.78 reached in late January, with the year-to-date loss now close to 6% and the weekly decline approaching 10%.

Should investors sell immediately? Or is it worth buying Silber Preis?

Fundamentally, the picture is mixed. The Silver Institute projects a sixth consecutive annual supply deficit for 2026, estimated at 67 million ounces, supported by an expected 1.5% increase in total global supply. Yet industrial silver processing is forecast to fall 2% to around 650 million ounces, driven by thrifting in photovoltaics and substitution in electronics. The structural tightness remains, but softer industrial demand is muting its price impact.

China, a key driver of industrial consumption, is sending conflicting signals. Economists surveyed by Reuters expect May exports to have risen 15% in dollar terms, up from 14.1% in the prior month, boosted by front-loaded overseas orders and demand for semiconductors and AI components. However, separate factory data showed a sharp drop in new export orders in May after hitting a two-year high in April. China's unusually high silver imports earlier in 2026, led by solar industry buying, are a wild card: slower imports would amplify industrial headwinds, while sustained volume would confirm that physical demand remains more resilient than price action suggests.

For now, silver is pinned to the Federal Reserve's policy trajectory. The combination of rising yields, a firm dollar, and selective industrial weakness has overpowered both geopolitical risk and a deepening supply deficit. Until the interest-rate outlook shifts, the metal's traditional crisis premium is likely to remain absent.

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