Silver declined 0.43% to settle at Rs 221,173, extending recent losses as investors maintained a cautious stance ahead of the US Federal Reserve’s policy decision. Markets maintain the expectation that the Fed will hold interest rates steady this week, yet the anticipation for a potential rate increase in September persists, driven by ongoing inflationary pressures. Nonetheless, the potential for downside appeared constrained following the alleviation of geopolitical tensions between the United States and Iran, which led to a decline in crude oil prices, thereby mitigating concerns regarding energy supply disruptions and inflationary pressures. The suspension of US military operations against Iran and Tehran’s decision to halt retaliatory actions have contributed to a reduction in safe-haven demand for precious metals, simultaneously enhancing overall market sentiment.
Fundamentally, stronger-than-expected US economic data persisted in exerting pressure on silver. Initial Jobless Claims fell to their lowest level since September 1969, reinforcing the resilience of the US labour market and supporting expectations for further monetary tightening. Several Federal Reserve officials, including Beth Hammack, Lorie Logan, Philip Jefferson, and Chair Kevin Warsh, reiterated that additional rate hikes could be necessary if inflation remains persistent. Despite weaker US consumer and producer inflation data in June, the increase in import prices underscored persistent inflationary risks.
ANZ anticipates that silver will continue to be closely correlated with gold in the short term, while enhancing industrial demand is expected to bolster the fundamentals in the medium to long term. In the physical market, silver holdings in London vaults rose by 1.7% in June, reaching a total of 28,082 tonnes. This amount corresponds to roughly 936,052 silver bars, with a valuation of US$53.1 billion. India’s silver imports experienced a significant decline of 87% year-on-year in May, amounting to US$75.57 million. Concurrently, import volumes fell by 94%, totalling merely 33 metric tonnes. This sharp decrease can be attributed to stricter import restrictions and elevated import duties implemented to curtail the influx of precious metals.
Technically, silver is experiencing renewed selling pressure, as evidenced by a 1.99% increase in open interest to 12,189 lots, which suggests the establishment of new short positions. Immediate support is identified at Rs 219,510, with subsequent support at Rs 217,845, while resistance is established at Rs 224,030. A sustained move above this level could open the door towards Rs 226,885, whereas failure to hold support may trigger additional downside momentum.