Reputed financial publication Barron's has come out with a study based on technical analysis, which makes a case that silver (SIK26) will find strong support at $61 levels. Now hovering around the $73 levels, the piece reckons that the 200-Day simple moving average is around the levels of $60, and the precious metals could stage a turnaround from here. A double-bottom formation around those levels has also been cited as a reason for it being a point of turnaround.
Meanwhile, options data has a bearish bias currently. While the Put premium for the May Silver Futures Contract stands at $98,203,470 in total, the same for the Call premium is much lower at $24,184,990. The picture shows a change in the ratio of Put/Call Open Interest, albeit not by much, as it stands at 0.83, reflecting that there may be higher demand for Calls in silver, but it is not significant.
However, there is a certain major overhang over silver prices.
How To Play With Silver as the War Rages On?
Since the first strikes on Iran led by the U.S. and Israel, silver prices have been on a downward spiral. The prices for the May contract are down 17.5% in less than a month, as the world remains on tenterhooks and makes a beeline for safe-haven assets such as the U.S. dollar or simply cash.
Moreover, beyond the immediate financial reverses, the war is also exerting profound pressure on the physical supply and demand fundamentals of silver. The white metal occupies a unique position as both a financial asset and a critical industrial component, with roughly half of its total demand originating from manufacturing sectors like solar energy, artificial intelligence data centers, and electric vehicles. The energy crisis triggered by the war in the Middle East threatens to slow global economic growth, which invariably raises concerns about softening industrial consumption of silver.
Concurrently, the supply side is facing its own set of distinct challenges. The silver market is currently staring down its sixth consecutive year of structural deficit, with the Silver Institute projecting a global supply shortfall of 67 million ounces for 2026.
Notably, this existing supply deficit is now being compounded by the soaring operational costs associated with the war. Mining and refining are highly energy-intensive processes. Prolonged elevation in fuel prices severely compresses operating margins for primary silver producers worldwide. For instance, major producers in Mexico, the largest silver-producing nation globally, are already forecasting reduced output for the year due to declining ore grades and operational shifts. When these preexisting production hurdles collide with the inflationary pressures of a global energy shock, the cost of extracting new silver rises exponentially, putting a rigid floor under how far prices can fundamentally drop despite the current paper market liquidation.
Looking ahead, the trajectory for silver remains highly volatile and heavily dependent on geopolitical developments. If diplomatic efforts succeed in de-escalating the conflict and stabilizing energy markets, central banks may resume their dovish monetary policies, which would act as a massive tailwind for precious metals. Under a stabilization scenario, fundamental industrial demand and severe physical supply deficits could quickly propel silver back toward the $100 threshold. Until such clarity emerges, the market will likely experience continued consolidation, caught in a tug of war between physical scarcity and macroeconomic headwinds.
Final Take
The strategy around silver is twofold at the current juncture. While short-term traders should have a bearish bias until the prices reach the levels of early $60. Post that, measured long positions can be entered into to benefit from a rise in prices.
Meanwhile, for those looking to build a position for the long term, the structural demand for silver, particularly in the AI and renewable energy industries, along with a supply deficit, makes the current correction a significant opportunity to load up on the precious metal.
On the date of publication, Pathikrit Bose did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
/Microsoft%20Corporation%20logo%20on%20sign-by%20Jean-Luc%20Ichard%20via%20iStock.jpg)
