Silver prices experienced a significant decline, closing 5.65% lower at Rs 2,13,075, as market participants increasingly anticipate that the U.S. Federal Reserve may sustain a tighter monetary policy for an extended period. A stronger U.S. dollar was the primary factor behind the decline after the Fed’s latest meeting, during which revised projections revealed that a majority of policymakers support at least one more rate hike this year to address inflationary pressures associated with rising energy costs. Robust U.S. economic fundamentals, characterised by resilient business activity and a stable labour market, have bolstered expectations that the Federal Reserve can maintain its focus on achieving the 2% inflation target.
Market participants are currently assigning a 70% probability to the likelihood of a rate increase in September. Investors are closely observing forthcoming U.S. economic data, especially the Personal Consumption Expenditures Price Index and the final estimate of first-quarter GDP, as these reports have the potential to markedly impact interest-rate expectations and sentiment towards precious metals. Meanwhile, the U.S. current account deficit expanded to $226.8 billion in the first quarter of 2026, underscoring persistent external imbalances despite governmental initiatives aimed at reducing the trade gap. On the physical market front, silver demand has exhibited a lacklustre performance.
India’s silver imports experienced a dramatic decline of 87% year-on-year in May, reaching their lowest level in over three years. This significant drop can be attributed to the government’s implementation of stricter import restrictions and an increase in import duties on precious metals, which were raised from 6% to 15%. In terms of volume, imports experienced a significant decline of 94%, totalling merely 33 metric tonnes. Nonetheless, silver holdings in London vaults rose by 0.6% month-on-month, reaching 27,611 tonnes, which suggests a sufficient level of global inventory availability.
Technically, the market is experiencing long liquidation, evidenced by a sharp decline in open interest of 39.21% to 6,736 lots, accompanied by a significant drop in prices. Silver exhibits immediate support at Rs 2,07,870; a breach of this threshold is anticipated to catalyse additional weakness, potentially steering prices towards Rs 2,02,665. On the upside, resistance is observed at Rs 2,22,695, and a sustained movement above this threshold may facilitate a recovery towards Rs 2,32,315.