Silver prices experienced a notable increase, closing 2.69% higher at Rs 227,584, bolstered by persistent weakness in the U.S. dollar and diminishing expectations regarding an imminent rate hike by the U.S. Federal Reserve. The dollar hovered near a six-week low as traders adjusted the likelihood of a September rate increase in light of positive diplomatic developments between the United States and Iran. U.S. President Donald Trump remarked that negotiations with Iran were constructive, which has elevated expectations for a potential resolution to the extended conflict and alleviated inflation worries associated with energy markets.
Meanwhile, New York Fed President John Williams asserted that inflation is anticipated to moderate gradually, yet he underscored that the Federal Reserve stands ready to tighten policy further should inflation not show signs of cooling. Market expectations for a September rate hike, as indicated by the CME FedWatch Tool, have decreased to 59% from 67% the previous day, which has contributed further support to precious metals. Fundamental indicators exhibited a varied perspective for the silver market.
Silver holdings in London vaults rose by 1.7% month-on-month to reach 28,082 tonnes at the close of June, with a valuation of around $53.1 billion, reflecting robust institutional inventories. In contrast, India experienced a significant decline in silver imports following the government’s implementation of stricter import restrictions and an increase in duties. In May, imports experienced a significant decline, dropping 87% in value and 94% in volume, resulting in a mere 33 metric tonnes, marking the lowest level since February 2023.
The government has broadened its restrictions to encompass silver grain and powder, while upholding elevated import duties of 15% in an effort to alleviate pressure on foreign exchange reserves. Technically, silver experienced short covering as open interest decreased by 6.4%, coinciding with a notable strengthening in prices. Immediate support is established at Rs 224,250, with subsequent support at Rs 220,920, while resistance is identified at Rs 229,905. A sustained breakout above this level could drive prices towards Rs 232,230.