Silver prices closed up by 1.76% at Rs 239,653, buoyed by a more favourable risk sentiment following U.S. President Donald Trump’s suggestion that a peace agreement with Iran might be reached as soon as this weekend. However, underlying inflation concerns persisted at a high level, with U.S. producer prices increasing by 6.5% year-on-year in May, representing the most significant rise since November 2022 and slightly surpassing market expectations. Consumer inflation has persisted at a three-year high, bolstering anticipations that the Federal Reserve might uphold a stricter monetary policy approach and could possibly increase interest rates in 2026.
In line with the global policy shift, the European Central Bank has implemented its inaugural rate hike since 2023 and has adjusted its inflation forecasts for 2026 and 2027 upwards. Geopolitical developments continued to shape market sentiment as tensions in the Middle East remained elevated, despite ongoing diplomatic efforts. Meanwhile, the U.S. economy has shown remarkable resilience, bolstered by robust labour market conditions and consistent economic indicators. On the demand side, China’s silver imports reached an unprecedented 836 metric tonnes in March, almost tripling the historical seasonal average.
Robust retail investment interest and proactive stockpiling by the photovoltaic sector in anticipation of policy shifts have notably enhanced imports and bolstered domestic silver premiums. In India, the government has implemented restrictions on the importation of silver bars and semi-manufactured silver products. This action is intended to decrease import volumes and alleviate pressure on the rupee. The restrictions may lead to a reduction in domestic availability and an escalation of local market premiums. Silver holdings in London vaults experienced a rise of 0.6% in May, totalling 27,611 tonnes.
From a technical standpoint, the market is experiencing short covering, as open interest has decreased by 2% to 11,361 contracts, while prices have increased by Rs 4,148. Silver has immediate support at Rs 232,605, with further downside support at Rs 225,555. On the upside, resistance is observed at Rs 244,595, and a sustained move above this level could lead to further gains toward Rs 249,535.