Silver prices fell by 0.86% to close at Rs 246,389, as robust U.S. economic data bolstered expectations that the Federal Reserve may increase interest rates later this year. The U.S. labour market demonstrated resilience, as nonfarm payrolls rose by 172,000 in May, building on an upwardly revised increase of 179,000 in April. Consequently, market expectations for a December Fed rate hike have notably strengthened, with the probability increasing to over 70%, up from 45% just a week prior. Higher interest rate expectations impacted precious metals, while rising tensions between Israel and Iran contributed to market uncertainty.
Continued disruptions to energy supplies from the Persian Gulf and the near-closure of the Strait of Hormuz have supported crude oil prices, raising concerns over persistent inflation. Fundamentally, silver demand trends exhibited a varied landscape across key consuming regions. India has imposed stricter regulations on silver imports by categorising grain, powder, bars, and the majority of semi-manufactured silver products as restricted, necessitating prior approval from the Directorate General of Foreign Trade.
The move aims to reduce imports and ease pressure on the rupee after India spent a record $12 billion on silver imports during the last fiscal year. In contrast, China demonstrated remarkably robust demand, with March silver imports hitting a record 836 metric tonnes, nearly three times the historical seasonal average. Demand was propelled by retail investment acquisitions and stockpiling by the photovoltaic sector in anticipation of tax policy alterations. Meanwhile, silver holdings in London vaults rose by 0.6% in May to 27,611 tonnes, reflecting consistent institutional involvement.
Technically, the market is experiencing long liquidation, as open interest has decreased by 4.54% to 11,780 contracts while prices have trended downward. Silver has immediate support at Rs 239,970, with a break below this level potentially extending losses toward Rs 233,550. On the upside, resistance is observed at Rs 251,905, and a sustained move above this level could initiate further gains toward Rs 257,420.