Silver prices continued their upward trajectory, closing up by 1.88% at Rs 2,23,790, bolstered by increasing anticipations of interest rate reductions in the US and ongoing demand for safe-haven assets. Markets are progressively incorporating expectations for two rate reductions next year, as the mixed signals from the US economy bolster the argument for policy easing. Despite the third-quarter GDP expanding at a robust 4.3% annualised pace, the decline in consumer confidence observed in December, along with stagnant factory output in November, has bolstered expectations that the Federal Reserve may adopt a more accommodative stance in the near future.
Geopolitical tensions have further supported prices following the US’s imposition of a blockade on sanctioned Venezuelan oil tankers, thereby elevating risk premiums across commodities. Year-to-date, silver has experienced a remarkable increase of nearly 149%, propelled by a continuous structural supply deficit, robust industrial demand, and its designation on the US Geological Survey’s list of critical minerals.
Supply-side concerns have heightened as Chinese silver inventories have fallen to their lowest point in a decade, subsequent to record exports exceeding 660 tonnes in October aimed at alleviating a squeeze in London. Stocks in warehouses linked to the Shanghai Futures Exchange have reached their lowest levels since 2015, accompanied by a significant decline in volumes on the Shanghai Gold Exchange. Despite a 3.5% monthly increase in London vault holdings to 27,187 tonnes, liquidity outside China continues to be constrained.
From a technical perspective, the market is experiencing new buying activity, as evidenced by a 3.1% increase in open interest to 12,566, coupled with a price gain of Rs 4,137. Support is identified at Rs 2,20,050, with a potential test of Rs 2,16,310 if breached, while resistance is noted at Rs 2,25,980, allowing for further upward movement towards Rs 2,28,170.