Silver prices experienced a decline of 1.27%, concluding at Rs 235,505, as market participants responded to a combination of mixed macroeconomic indicators and rising geopolitical tensions. US inflation data broadly aligned with expectations, providing some reassurance that escalating energy prices associated with the Iran conflict have not yet substantially permeated overall consumer prices. Headline CPI accelerated to 4.2% in May, while core CPI increased by a mere 0.2% month-on-month, falling short of expectations. In light of the data, traders have marginally lowered their expectations for further tightening by the Federal Reserve, yet a 25-basis-point rate increase in December is still completely factored in.
Investors are currently anticipating the forthcoming PPI report to gain additional insights into the underlying inflationary pressures. Fundamental demand dynamics continue to provide support for silver, especially from China. In March, silver imports reached an unprecedented 836 metric tonnes, nearly tripling the historical average for the month. This surge can be attributed to robust retail investment demand and proactive stockpiling by photovoltaic manufacturers in anticipation of forthcoming alterations to export tax rebates. Elevated domestic Chinese silver prices in comparison to international benchmarks have also stimulated arbitrage inflows via Hong Kong.
In the interim, silver reserves stored in London vaults experienced an increase of 0.6% on a month-on-month basis, reaching a total of 27,611 tonnes. India has implemented immediate restrictions on the importation of silver bars and semi-manufactured silver products, a strategic measure designed to limit imports and bolster the value of the rupee. Given that India represents over 80% of its silver consumption via imports, the policy may restrict domestic supply and elevate local premiums. However, diminished import demand from India could exert downward pressure on global prices.
Technically, the market is experiencing long liquidation, as evidenced by a 2.78% decrease in open interest to 11,588 lots concurrent with the price decline. Immediate support is identified at Rs 232,085, with a breach below this level possibly leading to further declines towards Rs 228,670. Resistance is positioned at Rs 238,940, and a breach of this threshold may pave the way for a rise to Rs 242,380.