Silver prices experienced a significant pullback during Tuesday's U.S. trading session, erasing a portion of the sharp gains recorded in the prior session. The spot price for immediate delivery, often quoted as XAG/USD, declined by 3.23% to $80.6125 per ounce by 1:32 p.m. Eastern Standard Time. This represented a daily drop of $2.6920, with the metal trading near the lower end of its daily range, which spanned from $79.9990 to $84.0360.
Market Drivers: Dollar Strength and Data Anticipation
The primary catalysts for the sell-off were attributed to a strengthening U.S. dollar and heightened caution among traders ahead of key U.S. economic data releases scheduled for later in the week. A firmer dollar typically pressures dollar-denominated commodities like silver by making them more expensive for holders of other currencies. Market participants are intently focused on the upcoming nonfarm payrolls report and the Consumer Price Index (CPI) data, which will provide critical insights into the health of the labor market and the trajectory of inflation.
These data points are pivotal for shaping expectations around Federal Reserve monetary policy. When investors anticipate lower interest rates, non-yielding assets like silver and gold often become more attractive. Conversely, signs of persistent inflation or economic strength that could delay rate cuts tend to bolster the dollar and Treasury yields, creating a headwind for precious metals. Current market pricing suggests expectations for two 25-basis-point rate cuts within the year.
ETF and Futures Performance
The decline was mirrored in related financial instruments. The iShares Silver Trust (SLV), a popular exchange-traded fund that tracks the price of silver, traded down to $72.87 from a previous close of $76.04. Meanwhile, U.S. silver futures for active delivery were quoted around $80.22, reflecting a decline of approximately 2.45%. The benchmark 10-year U.S. Treasury yield saw a slight easing to about 4.149% during the session.
Analysts characterized the day's movement as a consolidation or light pullback following a period of notable volatility. David Meger, director of metals trading at High Ridge Futures, noted the market was pausing ahead of a "bevy of key economic data." This sentiment was echoed by other market observers who pointed to profit-taking and position-trimming after silver's explosive rally on Monday, which saw a gain of over 6%, itself following a near-10% surge in the previous session.
Structural Supply Deficit Provides Long-Term Support
Despite the near-term price volatility driven by macroeconomic factors, the fundamental backdrop for silver remains characterized by tight supply conditions. The Silver Institute, a leading industry organization, has projected a sixth consecutive annual global supply deficit for 2026. The institute forecasts this structural shortfall—where demand consistently exceeds supply—to reach approximately 67 million ounces.
The demand composition is expected to shift. Industrial fabrication, a major component of silver demand, is projected to decline by 2% to 650 million ounces. This is partly due to "thrifting" efforts in sectors like solar panel manufacturing, where producers are using less silver per unit, and some substitution with other materials. However, this weakness is anticipated to be offset by a significant 20% rise in physical investment demand, forecast to reach 227 million ounces. Total silver supply is expected to see a modest increase of 1.5% to 1.05 billion ounces.
This complex dynamic—where industrial demand shows signs of softening while investment demand surges—contributes to silver's notorious price volatility. The metal often trades with the dual characteristics of a monetary hedge, like gold, and an industrial commodity. When investment flows are strong, they can overwhelm other market factors, especially within an environment of persistent supply deficit.
Looking Ahead: Data and Deficits
The immediate focus for traders rests squarely on the upcoming economic indicators. The U.S. nonfarm payrolls report for January is due on Wednesday, February 11, with economists forecasting an addition of 70,000 jobs. The CPI data for January follows on Friday, February 13. Outcomes that surprise to the upside could reinforce a hawkish Fed narrative, potentially triggering another round of selling in silver as the dollar and yields adjust higher.
Beyond this week's data, the market will also monitor the Silver Institute's mid-April update to its supply-demand estimates for a longer-term assessment of the fundamental picture. The persistence of the deficit remains a key supportive pillar for prices, even as short-term trading is dominated by fluctuations in the dollar and interest rate expectations.
