A double supply shock is building beneath the surface of the Silver market—and prices are starting to respond. While the broader metals complex is supported by Dollar weakness today, Silver is clearly outperforming Gold as traders begin to price in tightening supply conditions linked to sulphur shortages and China’s export restrictions.
At the heart of the story is a critical but often overlooked input. Silver production is heavily dependent on base metal mining, where sulfuric acid plays a key role in extraction processes. That creates a direct link between Sulphur availability and Silver output, turning disruptions in the former into constraints on the latter.
Those disruptions are now materializing. The closure of the Strait of Hormuz has hit Middle Eastern Sulphur supply, which accounts for a significant share of global production and an even larger portion of seaborne trade. This alone would tighten conditions, but the situation is being compounded by China’s policy shift.
China, the world’s second-largest exporter of sulfuric acid, will ban exports from May 1 to protect domestic supply for fertilizers and green technology. This move effectively removes the last major source of flexible supply for global markets, amplifying the impact of disruptions in the Middle East.
The result is a tightening feedback loop. As Sulphur supply contracts, mining operations face higher input costs and potential output constraints. This dynamic is particularly relevant for Silver, where production is less responsive to price signals due to its by-product nature.
Markets are beginning to price this risk. The narrative has shifted from macro-driven gains to a more structural supply story, with traders increasingly focused on the potential for a physical squeeze. If China enforces its export ban strictly, industrial users may be forced to secure supply at increasingly elevated prices.
Technically, Silver’s rebound from 60.97 resumed today, supported by improving sentiment and underlying demand. Momentum remains contained within the near rising channel, suggesting that the move is still in a developing phase.
Nonetheless, further rise is expected as long as 72.55 support holds, towards 38.2% retracement of 121.83 to 60.97 at 84.21. This level represents a key inflection point for the broader outlook.
Decisive break above 84.21 would confirm that the corrective decline from 121.83 has completed with three waves down to 60.97, opening the door for a stronger rally toward 61.8% retracement at 98.58.
Conversely, rejection at 84.21 would point to lingering weakness, with scope for another selloff toward the 60 structural floor.
