Silver prices experienced significant selling pressure, closing 3.62% lower at Rs 225,834. This decline was influenced by the rise in U.S. Treasury yields, a stronger dollar, and growing expectations that the U.S. Federal Reserve might reinitiate policy tightening later this year. Sentiment deteriorated following the adjustments made by both Deutsche Bank and BofA Global Research, which now factor in a potential rate hike in September. Improving U.S. labour market indicators also supported the hawkish view, with the NER Pulse report indicating that private-sector hiring averaged 30.75K jobs per week in the four weeks ending June 6, an increase from the previous average of 26.5K.
Market participants are currently paying close attention to the forthcoming U.S. PCE inflation report, which is the Federal Reserve’s favoured gauge of inflation, in search of additional insights regarding the direction of interest rates. Additional pressure on silver emerged from the alleviation of geopolitical tensions following the United States’ issuance of a 60-day licence for Iran to sell oil on the international market, which heightened expectations for a rise in global crude supplies. Shipping activity through the Strait of Hormuz has seen an uptick, with Iran exporting over 30 million barrels of oil in the past week. This increase has contributed to a decline in safe-haven demand for precious metals.
On the physical market front, India’s silver imports experienced a significant decline due to the implementation of stricter import regulations and increased duties. In May, imports experienced a significant decline, with value dropping 87% to $75.57 million and volume plummeting 94% to a mere 33 metric tonnes, marking the lowest level since February 2023. Meanwhile, silver holdings in London vaults experienced a month-on-month increase of 0.6%, reaching 27,611 tonnes at the end of May, which is roughly equivalent to 920,378 silver bars.
Technically, the market is experiencing long liquidation, as evidenced by a 5.19% decline in open interest to 9,377 contracts, coinciding with a significant drop in prices. Immediate support is positioned at Rs 224,450, with additional downside potential towards Rs 223,065. Resistance is observed at Rs 228,010, and a breakout above this threshold could potentially facilitate a movement towards Rs 230,185.