2026 Market Outlook: Price Variables Created by Supply Restrictions and Interest Rate Cuts

Background of Silver Price Plunge

The 1kg silver price recently responded to signals of easing geopolitical tensions. XAG/USD plummeted from a high of $84.03 last week to $75.00, a decline of about 11%. As President Trump and President Zelensky of Ukraine announced a significant breakthrough in peace negotiations in Florida, the inflow of funds into safe-haven assets decreased.

However, the negotiations have not been fully concluded. Key issues such as territorial disputes and the operation rights of the Zaporizhzhia nuclear power plant remain unresolved, maintaining uncertainty. This situation could still influence the future direction of silver prices.

China’s Export Restrictions Shake Global Supply Chain

Starting January 1, 2026, China’s restrictions on silver exports will have a significant impact on the market. The Chinese government has mandated that silver exporters obtain government licenses and limited license issuance to large, state-approved companies. This effectively excludes small and medium-sized exporters, raising concerns about a reduction in global silver supply.

Elon Musk also strongly opposed this policy. On X(, formerly Twitter), he criticized, “Silver is an essential resource in various industries such as semiconductors and solar energy,” pointing out that China’s restrictions could negatively affect the entire industry. In fact, an increase in the 1kg silver price may reflect these supply constraints.

US Federal Reserve Rate Cuts Boost Metal Demand

The prospect of rate cuts by the Federal Reserve in 2026 also supports silver prices. According to the CME FedWatch tool, there is a 73.3% probability of at least a 50bp( basis point) rate cut. Lower interest rates reduce the opportunity cost of holding cash, leading to increased funds flowing into interest-free assets like silver.

However, the Fed’s dot plot signals otherwise. The forecast of a 3.4% federal funds rate by the end of 2026 suggests that rate cuts may be limited to a single move. This indicates a more restrained rate reduction than market expectations, potentially constraining the upward momentum of silver prices.

Silver 1kg Price Shows Mixed Signals, Uncertain Trend

In the near term, silver prices are likely to fluctuate between gains and declines. The easing of geopolitical tensions is a short-term bearish factor, but China’s supply restrictions and expectations of rate cuts by the Fed serve as medium-term bullish factors.

The future direction of the silver market depends on which of these three variables takes the lead. If peace negotiations continue to progress, downward pressure may persist. However, if China’s export restrictions lead to actual supply shortages and the Fed’s rate cuts become more aggressive, the 1kg silver price could resume its upward trend.