Silver seems to have lost its shine. So far this year, silver has traded 23% lower and faces strong headwinds ahead. In June alone, silver prices cracked 22%.

Currently priced at around $58 per ounce, it has increased over 50% in the past year, but has retracted to levels last seen in December 2025. The all-time high price for silver remains $121, reached at the end of January.

Silver price in India is around Rs 2,20,00 per kg, not aligned perfectly with international prices after the recent duty hike, import restrictions, and new MCX norms.

So, what are the major headwinds putting pressure on Silver? The fact is both gold and silver, the two precious metals, are caught up in a vicious circle. The ‘center of this circle’ is the Strait of Hormuz, where the oil ships are struggling to break free from the blockage, since the start of the Iran war.

Rising Oil Prices

Rising oil prices push inflation higher, and that’s bad for the economy and companies if it stays higher for longer. Higher prices don’t just hit fuel costs but also impact prices of daily household goods. Therefore, it is a closely tracked indicator.

At $86, Brent still trades 20% higher than pre-Iran war levels. If the Iran war escalates, oil prices are most likely to increase, contributing to higher inflation. The recent high was $119 after the war broke out. That’s a reference point; any move towards it could become a trigger point for the financial markets.

But what has inflation got to do with silver, or for that matter gold? There is a strong reason. The US Federal Reserve influences global markets significantly, as commodities like oil, gold, and silver are traded internationally in dollars.

When oil prices rise, the dollar strengthens, as the demand for the currency rises. Simultaneously, inflation rises, putting pressure on the US Fed to hike rates. By raising rates, in an over-heated economy, liquidity squeezes, the cost of borrowing goes up, and prices of goods and services tend to fall, although with a lag.

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US Fed’s Position as of Today

US Fed has maintained interest rates at 3.5%-3.75%, but expectations for a rate hike in September are growing due to a resurgence in inflation following the outbreak of the Iran war.

In June, US CPI fell to 3.5% from 4.2% recorded a month before. But that was when talks of a ceasefire emerged between the US and Iran, leading to a significant fall in oil prices. Since then, the tensions have escalated, and oil prices even crossed $100 briefly.

3 members voted for a rate hike in the July FOMC meeting. A split vote signals not all members are convinced of a rate pause.

Kevin Warsh, the new Fed chief, is staying away from giving forward guidance to markets but has committed to bringing inflation lower. If oil doesn’t fall, bringing inflation down, at some point in time, the US Fed will have to hike rates.

An increase in interest rates strengthens the dollar, which is reflected in a 2% rise so far in 2026 in the dollar index after a decline of over 10% in 2025. As the dollar strengthens, the opportunity cost of holding non-yielding assets like gold and silver increases, leading investors to prefer dollar assets over these precious metals.

So, till the expectations of a September rate hike do down, or oil prices crash, silver prices are likely to consolidate around current levels.

Currently, gold is priced at $4,055 per ounce and silver at $58, maintaining the long-term average gold-silver ratio between 60-70.

For the ratio to remain unchanged, both gold and silver prices have to move in either direction. What’s in store for these two precious metals in the months ahead remains to be seen.

Uncertain and Volatile Silver

Investors, however, should be ready for one thing. Silver prices tend to move sharply higher or lower, showing higher volatility than gold. This year itself, we saw silver prices crash over 40% in May, after creating an all-time high in January. Gold too fell 20%, but relatively less than its cousin.

Unlike gold, silver has many industrial uses. And, any change in demand by industries has a direct impact on prices. A report by the Silver Institute talks of falling solar demand, but electronics, grid equipment, electric vehicles and data centers could become the new drivers for silver. In 2026, the silver market is heading for a sixth straight annual deficit of roughly 46 million ounces.

Further, silver has a much smaller market cap of about $3 trillion compared to nearly $30 trillion for gold. That leaves space for speculation leading to higher volatility.

Therefore, to a large extent, silver price movements are not dependent on factors like war or interest rates but also actual physical demand and speculative trades.

What to do

Investors interested in silver should consider a simple, straightforward strategy: limit exposure to 10%, including your gold investments, avoid leverage, and stagger investments over a long duration. As of now, there are no visible tailwinds that can restart the rally. Keep an eye on the bond yields that signal which way the rates are moving. Currently, 10-year yields are near 4.65%. By now you know how silver and gold will react if there’s a sharp movement in the bond yields, either way.

Disclaimer: This article is for informational purposes only and should not be construed as investment advice. Silver prices are subject to market risks, and past performance is not indicative of future results. Readers are advised to consult a certified financial advisor before making any investment decisions. Financial Express Digital does not take responsibility for any financial losses arising from decisions made based on this article.