Silver prices experienced a notable decline of 3.21%, closing at Rs 223,437. This movement can be attributed to investor reactions to heightened geopolitical tensions and a resurgence of inflation concerns, particularly in light of U.S. President Donald Trump’s declaration that the interim peace agreement with Iran was “over.” The announcement triggered a surge of more than 5% in crude oil prices following reports that Iran’s Revolutionary Guards targeted U.S. military bases in Bahrain and Kuwait. This action was a response to recent U.S. strikes and the revocation of Iran’s oil sales licence.
Increased energy prices have bolstered expectations for sustained inflation, leading markets to now assign a 66% likelihood to a U.S. Federal Reserve rate increase in September, an uptick from the previous 62% probability. Investors are anticipating the forthcoming release of the Federal Reserve’s June meeting minutes, seeking additional insights into monetary policy direction. In the physical market, India’s restrictions on silver imports have led to notable supply shortages, even in the context of relatively muted demand. Domestic silver premiums increased to $6.5 per ounce, marking the highest level in six months, in contrast to discounts reaching up to $5.5 per ounce in May.
Government data indicated a significant decline in India’s silver imports, with May imports decreasing by 87% in value and 94% in volume year-on-year, totalling merely 33 metric tonnes, marking the lowest level since February 2023. Import restrictions have been further tightened to encompass silver grain and powder, while import duties persist at a heightened rate of 15% to alleviate pressure on foreign exchange reserves. Meanwhile, silver holdings in London vaults rose by 0.6% to 27,611 tonnes at the end of May, suggesting stable institutional inventories.
Technically, the market is experiencing prolonged liquidation, evidenced by a 1.44% decrease in open interest in conjunction with declining prices. Immediate support is identified at Rs 218,805, with a breach below this level likely to challenge Rs 214,165. Conversely, resistance is established at Rs 229,500, with a subsequent level at Rs 235,555 should buying interest re-emerge.