Silver closed 0.57% higher at Rs 239,016 thanks to short covering after prices fell in response to better-than-expected US job statistics that raised bond yields and bolstered expectations of a rate hike by the Federal Reserve this month. In August, US nonfarm payrolls saw an increase of 162,000, significantly surpassing the anticipated figure of 56,000. Meanwhile, the unemployment rate held steady at 4.1%. In the wake of the jobs report, traders increased the likelihood of a Federal Reserve rate hike at the upcoming policy meeting to nearly 60%, up from approximately 50%, as indicated by the CME FedWatch Tool. Market participants are currently concentrating on the forthcoming US PPI and CPI data for additional insights regarding inflation and monetary policy.
Inflation risks continue to be pronounced as crude oil prices reached a near three-month peak in the wake of US-Iran shipping-related strikes. However, Iran has suggested that Tehran and Oman are poised to reveal specifics regarding a temporary safe passage through the Strait of Hormuz. Fed Governor Waller indicated that continued progress toward the 2% inflation goal could support holding rates at current levels. Fundamentally, silver continues to be underpinned by constricting supply dynamics, as the market approaches its sixth consecutive year of structural deficit.
A total of 762 million ounces have been extracted from inventories since 2021, heightening the potential for a resurgence of liquidity constraints. The global silver 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 forecasted to decrease by 2%. Industrial fabrication is projected to decline by 3%, reaching a four-year low, whereas demand for coins and bars is anticipated to increase by 18%. Global supply is anticipated to decrease by 2%. London vault holdings rose by 0.5% month-on-month, reaching 28,213 tonnes at the end of July, with a valuation of $52.7 billion.
Technically, the market continues to experience new buying activity, as evidenced by a 1.02% increase in open interest to 12,420, alongside a price increase of Rs 1,358, suggesting sustained bullish engagement. Silver is maintaining a position above Rs 236,830, and continued strength above this support level may sustain positive momentum toward Rs 240,595. A decisive breakout above Rs 240,595 may extend gains toward Rs 242,175, while a break below Rs 236,830 could trigger weakness toward Rs 234,645.
