Silver Falls to Seven-Month Lows as Monetary and Industrial Headwinds Weigh on Sentiment

Silver (XAG/USD) traded near $57 per ounce on Thursday, marking its lowest level since November 2025 after declining sharply over the previous two sessions.

At the same time, the US Dollar strengthened to its highest level in more than a year against a basket of major currencies, increasing the cost of dollar-denominated commodities for investors using other currencies. For traders across Southeast Asia, a stronger dollar can significantly increase the local-currency cost of gaining exposure to silver.

Why Silver Has Underperformed Gold

Silver's recent weakness reflects its unique position as both a precious metal and an industrial commodity.

Like gold, silver remains sensitive to changes in interest-rate expectations. According to CME FedWatch data, market participants are assigning a significantly higher probability of additional Federal Reserve tightening than they were a week ago.

Higher interest rates and rising real Treasury yields generally reduce the attractiveness of non-yielding assets, including precious metals.

However, silver also faces challenges tied to industrial demand.

According to industry forecasts cited by Metals Focus, demand from the solar photovoltaic sector—one of silver's largest industrial applications—could decline in 2026 as manufacturers continue efforts to reduce silver usage per panel and improve production efficiency.

Analysts at ING have also highlighted slower growth in solar-related silver demand, noting that silver-thrifting and substitution trends within photovoltaic manufacturing may continue to limit consumption growth.

Market analysts note that when both monetary and industrial demand drivers weaken simultaneously, downside pressure on silver can become more pronounced.

Focus Turns to US Inflation Data

Investors are closely watching the release of the US May Personal Consumption Expenditures (PCE) Price Index.

Economists surveyed by FactSet expect annual PCE inflation to rise to 4.1%, while monthly inflation is forecast to increase by 0.5%.

A stronger-than-expected inflation reading could reinforce expectations that the Federal Reserve will maintain a restrictive policy stance for longer, potentially supporting the US Dollar and Treasury yields while adding pressure to silver prices.

Conversely, softer inflation data could encourage a short-term recovery in precious metals, particularly given recent oversold conditions.

Technical Levels to Watch

The 4-hour Relative Strength Index (RSI) remains in oversold territory, suggesting that the pace of recent declines could moderate in the near term.

Technical analysts identify the December 2025 low near $56.45 as an important support level. If that area fails to hold, the mid-$54 region may emerge as the next potential support zone.

On the upside, silver would likely need to reclaim the $61.40 area, which previously served as support, before a more durable recovery scenario could gain traction.

Long-Term Fundamentals Remain Constructive

Despite recent weakness, longer-term supply fundamentals remain supportive.

According to the Silver Institute's World Silver Survey 2026, the global silver market is projected to record a sixth consecutive annual supply deficit, with cumulative inventory drawdowns continuing to tighten available supplies.

However, analysts caution that supply deficits alone may not prevent short-term price declines when broader macroeconomic conditions and interest-rate expectations dominate investor sentiment.

Sources: CME FedWatch Tool, FactSet Consensus Estimates, Silver Institute World Silver Survey 2026, Metals Focus.