Silver prices concluded the trading session down by 1.1% at Rs 271,846, as market participants exercised caution in light of the ongoing diplomatic negotiations between the United States and Iran concerning a potential resolution to the Middle East conflict. Market sentiment faced additional pressure due to hawkish remarks from Federal Reserve officials and the strengthening of the US dollar, which diminished the attractiveness of non-yielding assets. Richmond Federal Reserve President Thomas Barkin articulated that the existing monetary policy is suitably calibrated to address economic shocks, while highlighting apprehensions regarding inflation and the risks associated with economic growth.
Traders are currently assigning a 58% probability to the likelihood of at least one 25 basis-point increase in US interest rates by December, as indicated by CME FedWatch data. Economic sentiment indicators from the United States indicated an increase in uncertainty. The University of Michigan Consumer Sentiment Index experienced a significant decline, falling to a historic low of 44.8 in May. This marks the third consecutive month of decline, as rising petrol prices, attributed to disruptions in the Strait of Hormuz, persistently impact consumer confidence and inflation expectations. Despite weaker prices, physical silver demand from China has remained exceptionally robust. In March, China saw imports of nearly 836 metric tonnes of silver, a figure that is almost three times the historical seasonal average.
This surge can be attributed to robust retail investment demand and proactive stockpiling by photovoltaic manufacturers in anticipation of forthcoming export tax changes. Robust domestic premiums in China further stimulated global shipments into the nation via arbitrage opportunities. Meanwhile, India has implemented restrictions on silver imports in various forms to mitigate excessive inflows and alleviate pressure on the rupee. The restrictions are anticipated to constrain domestic supplies and may bolster local premiums, even in the face of diminished global demand.
India’s silver imports have experienced a significant increase over the past year, primarily driven by investment demand and unprecedented inflows into exchange-traded funds. From a technical perspective, the market is experiencing renewed selling pressure, evidenced by a 3.03% rise in open interest to 9,476 lots, alongside a price decline of Rs 3,037. Silver is maintaining support at Rs 269,155, with potential for further decline towards Rs 266,465. Resistance is identified at Rs 274,880 and Rs 277,915 levels.