Silver settled 2.73% higher at Rs 243,243, buoyed by reduced expectations of an imminent US Federal Reserve rate hike in the context of rising tensions in the Middle East and disappointing US economic data, while actions in the Treasury market also impacted bond-market conditions. The US Treasury has unveiled intentions to significantly increase repurchases of 10-, 20-, and 30-year debt following the 30-year yield hitting its peak level since 2007. Meanwhile, the minutes from the Fed’s July meeting indicated that a portion of policymakers supported the idea of increasing interest rates this year to mitigate the risk of more intense inflationary pressures in the future.
US retail sales experienced a decline of 0.6% month-on-month in July, significantly underperforming against expectations of a 0.1% increase. Concurrently, the University of Michigan consumer sentiment index decreased to 51 in early August, down from 55.2 in July. Chinese imports of silver-bearing ores surged 62.5% year-on-year in June, reaching 219,000 tonnes, underscoring persistent industrial activity. CFTC data indicated that silver net long positions experienced a slight decrease of 755 contracts, bringing the total to 10,312 contracts for the week ending August 11. London vault holdings rose by 1.7% month-on-month, reaching a total of 28,082 tonnes, which is valued at $53.1 billion.
Fundamentally, the silver market is approaching its sixth consecutive structural deficit, with 762 million troy ounces withdrawn from stocks since 2021, thereby increasing the risk of renewed liquidity tightness. The global deficit is anticipated to expand to 46.3 million ounces in 2026, up from 40.3 million ounces in 2025, even as total demand is expected to decrease by 2%. Industrial fabrication is projected to decline by 3%, reaching a four-year low, whereas demand for coins and bars may increase by 18%, bolstered by robust purchasing activity in the United States.
Global supply is projected to decrease by 2%, as diminished ETP outflows and enhanced physical availability have alleviated the liquidity constraints experienced during the prior squeeze. Technically, the market is experiencing short covering, evidenced by a 7.1% decline in open interest to 9,954 contracts, while prices increased by Rs 6,456. Silver is finding support at Rs 237,610, and a breach of this threshold may reveal Rs 231,970. On the upside, resistance is positioned at Rs 246,945, and a sustained movement beyond this threshold may result in a test of Rs 250,640.
