Silver prices experienced a decline of 0.37%, concluding at Rs 222,634. This downturn can be attributed to the stronger US dollar, anticipations of further rate hikes by the US Federal Reserve, and ongoing geopolitical uncertainty that has impacted investor sentiment. US inflation surged past 4% in May, marking its highest point in three years, primarily driven by escalating energy prices associated with geopolitical tensions in West Asia. The stronger inflation data reinforced market expectations that the Federal Reserve may continue its policy tightening cycle. Fed officials also maintained a cautious stance, with policymakers emphasising that inflation remains well above the central bank’s 2% target despite some easing in services inflation.
According to CME FedWatch, traders are currently factoring in three rate hikes this year, with expectations for a September increase experiencing a notable rise. Geopolitical risks have continued to be heightened, particularly after the UN International Maritime Organisation halted ship escort operations through the Strait of Hormuz in response to reports of yet another attack on a commercial vessel, thereby reigniting apprehensions regarding regional stability. Fundamental data indicated a divergence in trends within the physical silver market. Silver holdings in London vaults experienced a 0.6% increase in May, reaching a total of 27,611 tonnes, which is valued at around US$67.3 billion.
In contrast, India’s silver imports experienced a significant decline following the government’s implementation of stricter import restrictions and an increase in import duties. Imports experienced a significant decline, falling 87% in value and 94% in volume relative to the previous year, marking the lowest level since February 2023. The government has broadened its restrictions to encompass silver grain and powder, concurrently raising import duties to 15%. This move is designed to curtail imports of precious metals and alleviate the strain on foreign exchange reserves in the context of high crude oil prices.
Technically, Silver is experiencing renewed selling pressure, as evidenced by a 6.21% increase in open interest, which suggests the establishment of new short positions. Immediate support is positioned at Rs 220,670, with additional downside potential towards Rs 218,710 should this level be breached. On the upside, resistance is observed at Rs 224,420, and a sustained movement above this threshold may lead to further gains towards Rs 226,210.