Silver settled higher by 0.52% at Rs 234,696, as the easing of the government bond sell-off and a retreat in oil prices bolstered sentiment. This positive shift followed reports indicating that Iran submitted a proposal to the United States aimed at ending the war and reopening the Strait of Hormuz within seven days. However, upside remained constrained by expectations of further Federal Reserve tightening, with the Fed raising rates by 25 basis points last week to 3.75%-4.00%, while 16 of 18 policymakers projected at least one additional hike this year.
Robust US PMI data and assertive remarks from Federal Reserve officials have bolstered expectations, leading markets to price in approximately a 71% likelihood of an interest rate increase in October. London vault holdings reached 28,213 tonnes at the end of July, reflecting a month-on-month increase of 0.5% and a valuation of $52.7 billion. The global silver market is projected to continue its trend of structural undersupply for the sixth consecutive year, having seen 762 million ounces drawn from stocks since 2021, which sustains apprehensions regarding potential liquidity pressures. The 2026 deficit is projected to expand to 46.3 million ounces, up from 40.3 million ounces in 2025, even with a 2% decrease in overall demand.
Industrial fabrication is anticipated to decline by 3%, reaching a four-year low due to heightened risks associated with weaker economic growth. In contrast, demand for coins and bars is forecasted to increase by 18%, bolstered by robust purchasing activity in the United States. Total supply is projected to decrease by 2% as producer hedging returns to its typical levels. Silver has experienced a decline of 35% from its January peak of $121.6 per ounce, following a remarkable 147% increase during 2025. This downturn can be attributed to enhanced physical availability and a decrease in demand from India, which have alleviated earlier liquidity constraints.
Technically, the market continues to experience short covering, as evidenced by a 4.42% decline in open interest to 14,756 contracts, while prices increased by Rs 1,214, suggesting a reduction in bearish positions. Silver is presently encountering support around Rs 232,330, and a breach beneath this threshold may initiate a downturn toward Rs 229,965. On the upside, resistance is positioned around Rs 237,130, while a sustained movement above this threshold could pave the way toward Rs 239,565.
