Silver prices extended gains, closing 2.14% higher at Rs 251,458, bolstered by widespread short covering and a rise in investor sentiment. The rally followed reports indicating that the United States and Iran had successfully negotiated a peace agreement, which would facilitate the reopening of the Strait of Hormuz, a crucial artery for global energy trade. The agreement, anticipated to be officially signed in Switzerland on June 19, encompasses sanctions relief for Iran, the lifting of blockades, and provisions concerning Tehran’s nuclear program.
The reduction of geopolitical tensions contributed to the stabilisation of financial markets, as investors remained focused on evaluating the prospects for global economic growth and monetary policy. Attention is now directed towards the forthcoming U.S. Federal Reserve policy meeting, where interest rates are anticipated to stay the same. Recent U.S. economic data revealed a mixed landscape, as manufacturing output held steady in May contrary to growth expectations, while industrial production increased by just 0.1%, falling short of market forecasts. At the same time, U.S. producer prices rose 6.5% year-on-year, underscoring ongoing inflationary pressures associated with previous disruptions in the energy market.
The European Central Bank has increased interest rates and revised its inflation projections for 2026 and 2027. Fundamental support for silver continues to be robust, especially from China. In March, silver imports reached an unprecedented 836 metric tonnes, nearly tripling the historical average. This surge was fuelled by strong retail investment demand and significant stockpiling efforts from the photovoltaic sector. London silver vault holdings rose by 0.6% month-on-month, reaching a total of 27,611 tonnes. In India, the introduction of new restrictions on silver imports is anticipated to constrain domestic supplies, which may bolster local premiums.
However, a decline in import demand could exert pressure on global trade flows. Technically, the market is experiencing short covering, as open interest has decreased by 1.78% to 11,172 contracts while prices have risen. Silver has immediate support at Rs 250,400, followed by Rs 249,350. Resistance is identified at Rs 253,350, and a sustained breakout above this threshold may pave the way for a movement towards Rs 255,250.