Silver settled 0.77% lower at Rs 2,23,706, as elevated oil prices and Treasury yields overshadowed the support provided by softer-than-expected US inflation data. The August PCE price index increased by 0.3% on a month-on-month basis, falling short of market expectations of 0.4%. This development has tempered expectations regarding an imminent rate hike by the Federal Reserve. Nonetheless, a number of Fed officials have maintained their advocacy for a tighter monetary policy in light of ongoing inflationary pressures. Fed Governor Michael Barr indicated that elevated energy prices and robust investment in AI have hindered advancements toward the 2% inflation target.
Meanwhile, New York Fed President John Williams asserted that an additional rate hike by the end of the year is a plausible consideration. Cleveland Fed President Beth Hammack emphasised that inflation, government debt, and prevailing economic conditions are significant contributors to the increase in long-term Treasury yields. Meanwhile, US Q2 GDP growth was revised up to 2.2% from 1.5%, following revised 2.5% growth in Q1, bolstered by stronger investment, consumer, and government spending. US personal consumption expenditures increased by 0.9% in August, surpassing expectations, while wholesale inventories experienced a rise of 0.7%.
At the end of July, London silver vault holdings experienced a month-on-month increase of 0.5%, reaching a total of 28,213 tonnes. This quantity is valued at $52.7 billion and corresponds to approximately 940,423 silver bars. The global silver market is anticipated to continue experiencing a structural deficit for the sixth consecutive year, with projections indicating that the deficit will expand to 46.3 million ounces in 2026, up from 40.3 million in 2025, even as total demand is expected to decrease by 2%. Industrial fabrication is projected to decrease by 3%, whereas demand for coins and bars is anticipated to increase by 18%. Additionally, total supply is expected to contract by 2%.
Technically, silver is experiencing renewed selling pressure, as evidenced by a 2.1% increase in open interest to 17,348, while prices have decreased by Rs 1,744. Support is positioned around Rs 2,22,240, and a decline beneath this threshold may lead to a decrease in prices toward Rs 2,20,775. On the upside, resistance is observed around Rs 2,26,430, and a sustained movement above this threshold may result in a target of Rs 2,29,155.
