XAG/USD rose about 4% on Wednesday and closed near $91, returning above $90 for the first time since the late-January sell-off. The move followed a drop from above $121 to around $64 in early February, a fall of roughly 47%.
The rise came as tariff concerns eased and safe-haven demand picked up after President Trump announced 15% global tariffs. COMEX registered inventories were below 100 million ounces, and physical supply in London remained tight.
Supply Deficit Outlook
The silver market is projected to record a sixth straight annual supply deficit in 2026, with demand exceeding supply by an estimated 67 to 200 million ounces. Mine output was reported at about 820 million ounces, with limited scope to increase.
The Federal Reserve kept rates at 3.50% to 3.75% in January, and minutes showed several officials discussed possible hikes if inflation stays above target. Jerome Powell’s term ends in May 2026.
Technically, price held above the 50-day EMA near $81 and the 200-day EMA around $59, with both still rising. A move above $92 may target $96 to $100, while a drop below $87 may refocus attention on the 50-day EMA.
Given the sharp recovery in silver back above $90, we are seeing a classic battle between powerful fundamental drivers and hawkish central bank policy. The recent 47% collapse from all-time highs in January 2025 serves as a stark reminder of the extreme volatility present in this market. While the move is encouraging, the Federal Reserve’s willingness to consider more rate hikes remains the single biggest headwind for precious metals.
Options Approach For Volatility
The underlying supply and demand story for silver is incredibly strong and provides a solid floor for prices. The ongoing structural deficit, now in its sixth year, is being driven by accelerating industrial demand, with photovoltaics alone having consumed over 230 million ounces in 2025, a figure we see growing this year. This, combined with critically low COMEX inventories and fresh safe-haven demand from new global tariffs, supports a bullish outlook.
In the coming weeks, we should consider using options to navigate the high volatility rather than taking outright positions. Buying call spreads, such as a March or April $95/$100 spread, offers a way to participate in further upside while defining risk, which is prudent given the recent crash. For those wary of the overbought signals, purchasing puts below the $87 support level could provide a hedge against another sharp reversal.
Looking further ahead, the potential for a more dovish Federal Reserve chair after May provides a significant tailwind for the second half of the year. The current hawkish stance is a short-term risk, but the longer-term picture is supported by both industrial demand and the prospect of a weaker dollar. We can use longer-dated derivatives, such as June or July call options, to position for this expected policy shift.
