Silver extended its decline on Friday, dropping 0.7% to $74.88 per ounce in London, as a strengthening U.S. dollar, climbing Treasury yields, and a spike in oil prices weighed on precious metals. The precious metal has been caught between safe-haven demand from geopolitical tensions and headwinds from rising yields, which diminish the appeal of non-yielding assets.
Brent crude oil surged to $107 a barrel, posting an 18% weekly gain, amid ongoing disruptions in the Strait of Hormuz, a critical chokepoint for global oil shipments. The rise in oil prices has revived inflation concerns, further pressuring silver and other metals. Spot silver traded in a range of $73.96 to $75.94, hovering just above Thursday's low.
In a move that could spur trading activity, the CME Group reduced the initial margin requirement on COMEX 5000 Silver futures from 14% to 11%, according to a clearing advisory. Lower margins reduce the cost of maintaining futures positions and may encourage more two-way trading, particularly in volatile markets. The adjustment comes as silver faces competing pressures from macroeconomic factors and supply dynamics.
In India, a major hub for silver consumption and investment, May silver futures on the Multi Commodity Exchange (MCX) slipped nearly 1% to 239,200 rupees per kilogram. Analysts pointed to the dollar's strength, elevated oil prices, and ongoing U.S.-Iran tensions as key drivers of volatility for both gold and silver.
Independent analyst Ross Norman highlighted the Strait of Hormuz as a critical "oil pinch point," noting that gold has struggled to gain upside momentum. This sentiment has spilled over to silver, as both metals tend to underperform when yields rise and investors shift toward interest-bearing assets. The correlation between silver and gold remains strong, with both facing similar headwinds.
Industrial demand for silver remains a wildcard. If the global economy slows further, silver could underperform gold due to its dual role as both a monetary and industrial metal. Jigar Trivedi of IndusInd Securities suggested that silver may trail gold if industrial demand softens. Kaveri More of Choice Broking described the short-term outlook for both metals as "moderately bearish," citing oil prices, inflation concerns, and geopolitical uncertainty.
On the supply side, the structural deficit story remains intact. Both the Silver Institute and Metals Focus project that the global silver market will record a sixth consecutive deficit in 2026, with a shortfall of 46.3 million ounces. However, Metals Focus managing director Philip Newman warned that the risk of another liquidity squeeze this year persists.
Traders are watching key levels, particularly the $75 mark, to gauge silver's near-term direction. A sustained break above that level could attract buying, while a drop below might trigger further selling. The CME margin cut could also inject new liquidity into the market. Meanwhile, oil prices, the dollar, and bond yields will remain critical drivers. Any clear move may show up first in oil tanker rates, bond yields, or dollar action rather than in silver itself.
