Silver (XAG/USD) was already in a weak position as speculators trimmed their bullish bets, and the new Iranian escalation has now reignited the oil bids working against it. The price of silver is down over 1% on a daily basis, at the time of writing.
The metal is trading near $74, well below January’s record level near $121. There are two forces going against this: slowing speculative demand and an oil market that has just surged due to Middle East risks.
Speculators were already pulling back before oil moved
Silver’s softness didn’t start with the headlines this week. Positioning data showed that speculators reduced bullish exposure before oil rose more than 2% due to the escalation of the Iran war.
In the May 26 COMEX Silver Commitments of Traders (COT) report, large speculators reduced their long bets and added short positions.
Want more ideas like this? Sign up for Editor Harsh Notariya’s daily newsletterhere.
Non-commercial traders, the group that includes funds and other speculators, reduced long positions by 1,833 contracts and added 615 short positions. This is the profile of a crowd of people taking money off the table as silver prices remain range bound for some time, down 1% m/m.
The trading hedgers went the other way, reducing short positions by 1,278 and adding 497 long positions, so they turned slightly less bearish. Total open interest, the number of contracts still live, rose by 993 to about 101,744. The market is not empty. Positioning was simply more careful.
JP Morgan said it remains cautious on silver Until the froth from the 2025 race becomes more apparent. The COT position shows the same caution.
Then Iran reignited the oil bidding and the silver-for-oil trade
Iranian state media said on Monday that Tehran had done so Suspension of talks with the United States. It also pledged to completely close the Strait of Hormuz, which transports about a fifth of the world’s oil. Oil jumped on the news. The price of crude oil (WTI) rose more than 5% on June 1, reversing a series of declines built on hopes of a ceasefire. The rise in WTI is now over 8% on a weekly basis.
This is important for silver because the two are moving in opposite directions. The 30-day rolling correlation, a measure of how closely the assets track each other, is near minus 0.42, which is quite negative.
When the price of oil rises due to supply concerns, it leads to higher inflation rates and concerns about interest rates, and increases energy costs for industrial buyers. Silver has tended to fall as oil has risen, and the gap is wide. Since early March, the price of crude oil has risen about 28% while silver has fallen about 10%.
Truce talks in late May briefly went in the other direction. Silver rose on May 29 as oil prices fell, but Monday’s rally reversed that.
Cash sellers got into silver while options buyers stayed long
The pressure has been transferred to the spot and token markets. Silver fell More than 1% in a 30-day window and showed net sales of nearly $48 million on Hyperliquid, with gold closing at negative $50 million. Silver was valued at around $5.3 billion, so the selling came in a real flurry.
The options market told a different story. on iShares Silver Trust (SLV)The put/call ratio, which weighs bearish trades against bullish calls, was 0.44 by volume and 0.53 by open interest on June 2.
Both readings are well below 1, meaning calls outnumber puts. Options traders maintained their bullish bias even as spot sellers pushed the price down.
This division frames the confrontation. Cash sellers react to the immediate headwinds for oil, while the options crowd pushes for the bounce, in keeping with the trading side of the COT. Selling revolves around the recent hype, but buying the call is betting that the weakness is short-lived. Another signal points to long-term silver demand.
Solar demand model highlights silver at rare discount
The last reference refers to the industrial side of silver. The custom Silver vs Solar Lag pattern fell to around minus 2.77. The tool tracks the gap between the silver price and the signal based on solar-driven demand.
The pattern depicts the big turns for silver. It reached its upper range around the January 29 record high above $121. It last bottomed near minus 3.35 in mid-May 2025, when… Silver price sat Close to its $32 base. From that floor, the metal ran all the way to the log.
Now the pattern is back near that floor at negative 2.77, with the price of silver around $74. The reading puts the price at a significant discount to what the solar demand signal indicates. It’s the same type of discount that came before the last leg up, although a single signal is no guarantee.
This discount is consistent with other forward-looking signals. Commercial hedgers trimmed their short positions on May 26, and SLV options were short. Both lean against speculators reducing long positions and cash sellers reacting to oil.
The discount is important because silver is in short supply. Demand has outstripped supply for five years, with 2026 set to be the sixth. Higher prices prompt solar manufacturers to use less silver per panel, as industrial demand should do It fell about 2% this year But supply is also shrinking, so the shortage continues to widen.
For now, the signals are split. Rising oil could keep silver under pressure in the near term. But shortfalls, bullish options and a cheap pattern reading indicate that the decline may be a stop rather than a top.
this post Silver bleeds $48 million as oil pressure returns appeared first on BeInCrypto.
