Silver prices settled down 1.21% at Rs 233,841, influenced by hawkish remarks from U.S. Federal Reserve Chair Kevin Warsh, who cautioned that inflation is not easing significantly and emphasised the necessity to restore inflation toward the 2% target. Markets are currently assigning a probability of approximately 57% to a 25-basis-point increase in the Fed rate for September, a significant rise from about 40% just a week prior. Meanwhile, July’s core inflation rate has surged to 3.7%, maintaining a restrictive outlook for monetary policy. Rising oil prices exerted downward pressure on sentiment following the targeting of Iranian rocket launchers by U.S. forces, which were poised to deploy mines into the Strait of Hormuz. This development heightened concerns regarding geopolitical tensions and inflationary pressures.
Despite near-term pressure, silver fundamentals remain supportive as the global market is anticipated to experience a structural deficit for the sixth consecutive year.The deficit is anticipated to expand to 46.3 million ounces in 2026, up from 40.3 million ounces in 2025, despite an expected 2% decrease in total demand. Global silver supply is projected to decrease by 2%, with industrial fabrication anticipated to drop by 3%, reaching a four-year low. This decline is partially indicative of subdued growth expectations. In contrast, demand for coins and bars is projected to increase by 18%, bolstered by heightened purchasing activity in the U.S.
Since 2021, approximately 762 million troy ounces have been extracted from inventories, heightening the potential for another liquidity squeeze. London vault holdings reached 28,082 tonnes at the end of June, reflecting a month-on-month increase of 1.7% and a valuation of $53.1 billion. Speculative positioning exhibited a positive trend, as COMEX silver net longs rose by 2,467 contracts, reaching a total of 13,235 contracts for the week ending August 25. However, silver remains approximately 35% below its January peak of $121.6 per ounce after the significant 147% rally in 2025.
Technically, the market is experiencing long liquidation, as evidenced by a 35.98% decrease in open interest to 4,005 contracts, alongside a price decline of Rs 2,863. This suggests profit-taking and a deterioration in near-term momentum. Support is positioned at Rs 231,960, with a breach below possibly leading to Rs 230,080. On the upside, resistance is observed at Rs 236,260, and a sustained move above this level could initiate a recovery toward Rs 238,680.
