Fed Rate Expectations Pressure Silver Despite a Sixth Straight Supply Deficit

• Silver fell 1.89% to $57.60 an ounce as markets priced roughly a one-in-three chance of a Fed rate hike, weighing on precious metals. 
• The pullback leaves silver within its $55 to $61.30 trading range even as the World Silver Survey forecasts a sixth straight supply deficit of 46.3 million ounces, up from 40.3 million ounces in 2025. 
• That gap suggests price weakness is being driven by rate expectations rather than physical supply. 
• Money Metals Podcast strategist Gregory T. Weldon said he is rebuilding physical silver positions after previously identifying $54 as a downside level during the correction. 
• The Fed's policy decision is due Wednesday at 2:00 p.m. ET. A hold or dovish signal could shift attention back to the supply deficit and support a move toward the $65 resistance level.

Fed Hike Expectations Pressure Silver & Keep the $55 Support in Focus

Silver fell 1.89% to $57.60 an ounce as markets priced roughly a one-in-three chance of a Fed rate hike, pushing the metal toward the lower end of its $55 to $61.30 trading range. The move reflects rate expectations rather than a change in physical supply. Silver remains well above its $55 support after correcting from its record high above $100 earlier this year, leaving the broader trading range intact. 

The Silver Volatility Index held at 48.09, signaling markets expect larger price swings around the Fed decision. If the Fed delivers a hold or softer guidance, attention could quickly shift back to silver's supply deficit and support a move toward the upper end of the range.

Fed Rate Expectations Weigh on Silver & Physical Supply Remains Tight

The selloff was driven by monetary policy expectations rather than physical supply. Citadel Securities expects the Fed to raise rates to reinforce Chairman Kevin Warsh's inflation stance, keeping pressure on silver ahead of the policy decision. 

US-Iran talks lowered oil prices and eased inflation expectations, although Trump's warning that military action could resume keeps geopolitical risk in focus. Neither development changes silver's physical balance, with the World Silver Survey forecasting a sixth straight annual deficit of 46.3 million ounces in 2026, up from 40.3 million ounces in 2025. If rate-driven selling fades, the unchanged supply deficit could become the market's primary price driver again. 

Rate-Driven Selling Keeps Silver in a $54 to $65 Range & Supply Tightens

Rate-driven selling can create opportunities when physical supply remains constrained. Gregory T. Weldon said he is rebuilding physical silver holdings after reducing exposure when prices traded above $100, reflecting a disciplined accumulation strategy rather than a reaction to short-term volatility. 

Weldon’s $54 to $61 accumulation range aligns with a projected sixth straight annual silver supply deficit in 2026. Silver was testing support near $56.81 ahead of the Fed's policy decision. Above-ground silver inventories have fallen by 762.1 million ounces since 2021, suggesting macro-driven weakness does not change the market's tightening physical supply.

Silver Volatility Raises Leverage Risk & Rewards Disciplined Position Sizing

A 1.89% intraday move can trigger margin pressure on leveraged CFD positions, where losses may exceed the initial deposit. A standard CME silver futures contract represents 5,000 troy ounces, so smaller positions typically use CFDs, ETFs, or silver mining equities. Weldon said one silver-equity position returned 167% after gains reached 217% before profit-taking. 

That approach locks in gains at higher prices and rebuilds exposure after pullbacks into the $54 to $61 range. Markets remain divided on the Fed's decision, increasing the likelihood of short-term price volatility. Concentrated positions face higher risk around the Fed's policy announcement. The $54 to $65 range remains the key trading zone while monetary policy drives short-term volatility and the physical silver deficit remains unchanged.

One-in-Three Fed Hike Odds Keep Silver Near Support Until the Fed Decides

Silver remains near the lower end of its range as markets price roughly a one-in-three chance of a Fed rate hike, keeping pressure on prices despite an unchanged physical supply outlook. Silver was testing support near $56.81 ahead of the Fed's policy decision, while the projected sixth straight annual supply deficit continues to support the $54 to $57 range. 

A Fed hold or dovish guidance could shift attention from rate expectations back to tightening physical supply, supporting a move toward the $65 resistance level, about 13% above $57.60. Physical silver and silver equities have historically outperformed gold as precious metals recover from periods of macro uncertainty. The Fed's policy statement and the Silver Volatility Index, which closed at 48.09, remain the key indicators to watch. A higher volatility reading would signal expectations for larger price swings, while a steady reading would suggest the current range remains intact despite the projected supply deficit.