Silver Slips on Profit-Taking as Fifth Straight Annual Deficit Persists

• Silver fell 0.97% to $63.80/oz as profit-taking followed a seven-week high near $65.
• Softer US inflation cut September Fed rate-hike odds to 35% from 55% a week earlier, lowering silver’s opportunity cost.
• Silver recorded a fifth consecutive annual deficit of 40.3 million ounces in 2025 despite recycling reaching a 13-year high of 197.6 million ounces.
• Global industrial silver demand hit a record 680.5 million ounces in 2024, with EVs and AI data centers broadening the demand base.
• Trading Economics is targeting $67.93/oz by Q3-end and $81.26/oz within 12 months, while a close above $65 would strengthen the rebound case.

Softer Inflation Cuts September Hike Odds to 35%, Reducing Pressure on Silver

Silver fell 0.97% to $63.80/oz for a second straight session after reaching a seven-week high near $65. The pullback came as core producer prices rose less than forecast and consumer inflation slowed to 3.4% year over year. 

Those readings cut market-implied odds of a 25-basis-point September Fed hike to 35% from 55% a week earlier. Lower rate-hike odds reduce the opportunity cost of holding non-yielding silver, supporting prices. The 0.97% decline is consistent with profit-taking rather than weaker demand, with silver still up 10.49% over one month and 67.84% over one year.

70% Byproduct Production Limits Mine Response, Strengthening Silver’s Long-Term Price Support

About 70% of mined silver is produced as a byproduct of copper, lead, zinc and gold mining, limiting how quickly supply can respond to higher silver prices. That supply constraint contributed to a fifth consecutive deficit of 40.3 million ounces in 2025 despite recycling reaching a 13-year high of 197.6 million ounces. Automotive silver demand exceeds 70 million ounces annually, with Oxford Economics targeting 3.4% compound annual growth through 2031. 

China’s silver-bearing ore imports rose 62.5% year over year to 219,000 metric tons, adding another indicator of physical demand. EVs and AI data centers helped lift industrial silver demand to a record 680.5 million ounces in 2024, strengthening the case for higher prices while supply remains slow to respond.

$67.93 Q3 Target Remains in View Unless CPI Reaccelerates Above 3.4%

About 70% of mined silver is produced as a byproduct, so higher silver prices alone cannot quickly lift supply because output depends mainly on copper, lead, zinc and gold production. That slow supply response leaves the 0.97% pullback disconnected from the longer-term deficit unless primary-metal output rises enough to close it. 

A US CPI reading above 3.4% would raise the risk of higher Fed rate-hike odds, increasing the opportunity cost of holding silver and testing the rebound case.

48% Drawdown Improves Entry Pricing While Direct Silver Exposure Limits Equity-Specific Risk

Retail portfolios can express the deficit thesis through direct silver exposure or mining equities, with different risk profiles. Bullion and silver-backed ETPs provide direct metal exposure, while mining equities and futures add company, jurisdictional or leverage risk. At $63.80/oz, silver remains about 48% below its January peak of $121.64/oz, showing that supply deficits do not prevent deep drawdowns. 

Positioning, margin calls and macro shocks can outweigh physical deficits in the short term, extending price declines. Fed policy and CPI can determine near-term timing even if the longer-term supply deficit remains intact. The deficit and demand data support measured exposure on weakness rather than chasing a precise bottom, while allowing for a deeper drawdown.

$65 Breakout Would Strengthen Silver's Rebound Case

September Fed rate-hike odds have fallen to 35% from 55% a week earlier, reducing the opportunity cost of holding non-yielding silver and supporting prices above $63. A close above $65 would strengthen the rebound case and bring the $67.93 Q3 target closer, while Fed guidance that pushes hike odds back toward 55% could extend the pullback. 

The next US CPI report and September Fed decision are the key catalysts for near-term silver pricing. A CPI reading above 3.4% year over year would increase the risk of higher Fed rate-hike odds and weaken the rebound case.