Silver prices experienced a significant drop in the last session, closing 3.37% lower at Rs 268,491. This decline coincided with a strengthening U.S. Dollar Index as investors evaluated the implications of persistent geopolitical tensions and newly released inflation data from the United States. The ongoing conflict between Israel and Iran has now reached its twelfth day, with the Pentagon noting some of the most intense strikes to date and suggesting that operations may persist until Iran is completely neutralised.
The current circumstances have engendered a degree of uncertainty in international markets, especially following the disturbances in the Hormuz Strait, a critical passage for energy transportation. The closure of the strait has led to an increase in oil prices and reignited worries regarding global inflation, causing markets to temper their expectations for substantial interest rate reductions. U.S. inflation exhibited stability, as consumer prices increased by 2.4% in February, bolstering anticipations that the U.S. Federal Reserve will probably maintain interest rates at their current levels in the foreseeable future.
In light of the recent price correction, the physical silver market persists in exhibiting indications of tightening. Inventories on the SHFE have decreased to approximately 350 tonnes, marking the lowest point since 2015, which underscores increasing supply constraints. In a similar vein, silver holdings in London vaults decreased to 27,065 tonnes by the conclusion of February, indicative of consistent reductions in worldwide stockpiles.
From a technical perspective, the market is experiencing long liquidation, as open interest decreased by 3.11% to 5,848, while prices declined by Rs 9,359. Silver currently exhibits immediate support at Rs 263,390, with a breach below this level likely to test Rs 258,295. On the upside, resistance is identified at Rs 275,290, and a breach of this level may propel prices toward Rs 282,095.