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The Fed hiked rates 25bp on September 16, its first increase since 2023. By the textbook, that should have hurt silver. Instead, it rallied.
Silver dropped to $61.90 the day of the decision, then climbed 9% in 48 hours to $66-67. Falling oil prices, tied to Saudi Arabia restoring pipeline shipments, eased inflation worries and pulled yields down, more than offsetting the Fed’s hawkish tone.
A hawkish Fed and a metals rally happening at once isn’t as contradictory as it sounds, once you look at what’s actually driving this market.
The Road From $121 to $66
Silver is trading near $66-67 an ounce, up more than 50% from a year ago. That’s well off the highs: it hit $121.62 on January 29, 2026, before correcting sharply. Even after the pullback, 2025 stands as silver’s best year since 1979.
Six Years Underwater
2026 will mark the sixth straight year silver demand has outpaced supply. This year’s shortfall is 46.3 million ounces, and the market has drawn down 762 million ounces from above-ground stockpiles since 2021 to cover gaps like it.
Part of the reason supply can’t catch up: most silver comes as a byproduct of gold, copper, and zinc mining, so miners aren’t digging more just because the price is higher. New primary silver mines also take seven to ten years to bring online, which makes this a slow-moving problem no single good year can fix.
Follow the Metal
The clearest sign this deficit is real, not theoretical, showed up in October 2025, when London lease rates spiked to 39% against a normal rate below 1%. Spot prices briefly traded above futures, an inversion that only happens when buyers are desperate for metal right now rather than later.
That tightness hasn’t fully resolved. COMEX currently holds 96.4 million registered ounces out of 334 million total, and Shanghai has been trading at a 13% premium to COMEX that ordinary arbitrage hasn’t closed, largely because of China’s VAT and export licensing rules alongside India’s own tariff actions.
Solar Cools, Investors Pile In
Industrial demand is shrinking, mostly because of solar. Panel manufacturers are thrifting silver out of cells and shifting toward copper as prices stay elevated, and solar demand alone is expected to fall 19% this year. Total industrial use is down 2-3% to a four-year low, even with AI and automotive demand growing, because that growth still isn’t enough to offset solar’s decline.
Investment demand is moving the opposite way. Coin and bar demand is up 18%, the highest since 2022, and a January 2026 buying spike emptied mints across several countries for more than a week. Right now, investment demand is winning, which is a big part of why the deficit has persisted even as industrial use softens.
The Ratio That Keeps Snapping Back
The Silver Institute’s July 2026 study found the ratio reverts to a long-run average of about 59.65:1. It hit an extreme low of 45.6:1 in late January, when silver was historically cheap relative to gold, then swung back to roughly 70:1 by June.
What actually moves the ratio, according to the Institute’s own regression analysis, is relative investment demand between gold and silver, not the dollar, inflation, or interest rates the way most people assume.
$63 or $100? Take Your Pick
J.P. Morgan is at $70 for 2026 and $63 for 2027. HSBC is close behind at $70 and $65. Citigroup, on the bullish end, has a target above $100.
The gap comes down to which story wins: a narrowing deficit and softer industrial demand, or sustained investment buying and a possible Fed pivot back toward cuts. Neither camp has been meaningfully more right than the other over the past 18 months.
Four Tripwires Ahead
FAQ
Doesn’t look like it yet. Silver recovered almost the entire post-hike drop within two days, though more hikes later this year could still weigh on price.
Because deficits get covered by drawing down existing stockpiles rather than the market simply running out. Prices spike when that buffer visibly thins, the way it did during October 2025’s lease rate spike, not steadily in line with the annual deficit number.
Not killing it, but definitely shrinking its share. Manufacturers are using less silver per panel, and some are switching to copper outright, though thrifting is doing most of the work for now rather than wholesale substitution.
They’re working from the same data but weighting it differently. Bears lean on the narrowing deficit and soft industrial use, while bulls lean on investment demand and the chance of Fed cuts later in the year.
Think of it as a valuation lens rather than a timing signal. It tends to revert toward 60:1 over time, and it’s driven mostly by relative investment demand, not the macro factors people often assume.
Sources
- Silver Institute: Global Silver Investment to Remain Strong in 2026 Against the Backdrop of a Sixth Consecutive Annual Market Deficit, February 10, 2026
- Silver Institute: Is the Gold:Silver Ratio Relevant Today? (PDF), July 2026
- Kitco News: Silver Market Faces Another Deficit in 2026 as Volatility and Investment Demand Shape Outlook, April 15, 2026
- FXEmpire: London’s Silver Is Running Out of Room, April 23, 2026
- Discovery Alert: Why the Shanghai-COMEX Silver Gap Has Refused to Close, September 2026
- MINING.COM: Solar Silver Thrifting Not Enough to Curb Demand, June 5, 2026
- J.P. Morgan Global Research: Silver Price Forecast for 2026 and 2027, August 13, 2026
- Yahoo Finance: HSBC Raises Silver Forecasts for 2026 and 2027 but Warns Upside May Be Limited, May 17, 2026
- Vantage Markets: XAGUSD: Silver Holds $65.80 as Fed Delivers First Hike Since 2023, September 18, 2026
- MetalCharts.org: COMEX Silver Price & Inventory, September 15, 2026
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Sources: Silver Institute, Metals Focus, LBMA, CME Group, and financial press as cited. AktieGo doesn’t independently verify third-party data, so figures should be checked at the time you’re reading this.
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