Silver prices experienced a notable increase, closing 2.51% higher at Rs 223,189, as disappointing U.S. inflation data enhanced investor confidence in precious metals. Annual consumer inflation moderated to 3.5% in June, with core inflation decelerating to 2.6%, both figures falling short of market anticipations. The Consumer Price Index experienced a decrease of 0.4% on a month-on-month basis, representing its inaugural monthly decline since 2020. The softer inflation figures encouraged investors to reduce expectations of aggressive Federal Reserve rate hikes, providing strong support to silver prices despite inflation remaining well above the central bank’s long-term target. However, the broader monetary policy outlook continues to exhibit a degree of caution.
Money markets are currently pricing in a probability exceeding 50% for a Federal Reserve rate hike prior to the quarter’s conclusion, a sentiment bolstered by ongoing geopolitical uncertainties and inflationary pressures. Fed Chair Kevin Warsh reiterated the commitment of policymakers to restoring price stability and emphasised the central bank’s lack of tolerance for persistently elevated inflation. He also emphasised the resilience of the U.S. economy, pointing out steady economic growth, a robust labour market, low unemployment, and ongoing wage increases. Meanwhile, CFTC data indicated that COMEX silver speculators reduced net long positions by 616 contracts to 12,131 during the week ended July 7, reflecting a slight decrease in bullish positioning.
Fundamentally, developments in the physical market exhibited a mixed performance. At the conclusion of May, silver holdings in London vaults experienced a 0.6% increase, reaching a total of 27,611 tonnes. In contrast, India’s silver imports experienced a significant decline of 87% in value and 94% in volume year-on-year during May, attributed to stricter import restrictions and elevated import duties. The government has broadened its restrictions to encompass silver grain and powder, simultaneously increasing import duties to 15%. This move is aimed at curtailing imports of precious metals, following a notable $12 billion in silver imports recorded during FY2025/26.
Technically, silver is experiencing short covering, as open interest has decreased by 0.35% while prices have risen sharply. Immediate support is positioned at Rs 218,930, succeeded by Rs 214,675. Resistance is identified at Rs 226,435, and a sustained movement above this threshold may lead to further gains towards Rs 229,685, thereby preserving a favourable near-term technical perspective.