XAG/USD gained about 4% on Wednesday and closed near $91. That put it back above $90 for the first time since the late-January sell-off. The move followed an earlier drop from above $121 to around $64 in early February—a decline of roughly 47%.
The bounce came as tariff fears eased and safe-haven demand increased after President Trump announced 15% global tariffs. COMEX registered inventories stayed below 100 million ounces, and physical supply in London remained tight.
Supply Deficit Outlook
The silver market is expected to post a sixth straight annual supply deficit in 2026. Demand is projected to exceed supply by about 67 to 200 million ounces. Mine output was reported near 820 million ounces, with little room to expand.
The Federal Reserve held rates at 3.50% to 3.75% in January. The minutes showed several officials discussed possible rate hikes if inflation stays above target. Jerome Powell’s term ends in May 2026.
On the charts, price held above the 50-day EMA near $81 and the 200-day EMA around $59, and both averages are still rising. A break above $92 could open a move toward $96 to $100. A drop below $87 could shift focus back to the 50-day EMA.
Silver’s fast rebound above $90 highlights a familiar tug-of-war: strong fundamentals versus a hawkish central bank. The 47% plunge from the January 2025 record high is a clear reminder of how volatile this market can be. The rebound is constructive, but the Fed’s openness to more hikes remains the biggest headwind for precious metals.
Options Approach For Volatility
Silver’s supply-and-demand setup remains very supportive and helps create a floor under prices. The market is still in a structural deficit, now running into a sixth year. This is being driven by rising industrial demand. Photovoltaics alone reportedly used more than 230 million ounces in 2025, and we expect that number to grow this year. Alongside very low COMEX inventories and renewed safe-haven buying linked to new global tariffs, the backdrop remains bullish.
Over the next few weeks, options may be a better way to manage the volatility than taking outright positions. For example, a call spread—such as a March or April $95/$100 spread—can capture more upside while keeping risk defined, which is sensible after such a sharp sell-off. If you are concerned about overbought conditions, buying puts below the $87 support area can help hedge against another fast reversal.
Further out, the chance of a more dovish Fed chair after May could be a meaningful tailwind in the second half of the year. The current hawkish tone is a near-term risk, but the longer-term outlook is supported by industrial demand and the potential for a weaker dollar. Longer-dated derivatives, such as June or July call options, can be used to position for that potential policy shift.
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