Silver settled sharply lower by 4.96% at Rs 208,338, influenced by stronger-than-expected US inflation data that heightened expectations of additional Federal Reserve rate hikes. In September, the year-on-year US CPI inflation increased to 3.7%, surpassing expectations of 3.6%. Additionally, monthly inflation saw a rise of 0.6%, representing the most significant increase in five months. Core inflation has reached an annual rate of 2.6% and a monthly rate of 0.3%, surpassing forecasts and bolstering the case for a more stringent monetary policy approach.
Boston Fed President Susan Collins and New York Fed President John Williams suggested that an additional rate hike might be required before the conclusion of 2026 to manage inflation, whereas Fed Vise Chair Michelle Bowman preferred to hold off in order to evaluate economic and financial market trends. Despite the recent correction, the Silver Institute and Metals Focus anticipate that the market will experience its sixth consecutive annual structural deficit in 2026, with the shortfall projected to widen to 46.3 million ounces from 40.3 million ounces in 2025. Approximately 762 million ounces have been drawn from stocks since 2021, underscoring ongoing supply constraints and potential liquidity risks.
However, total silver demand is projected to decrease by 2% in 2026, with industrial fabrication anticipated to drop by 3% to a four-year low, driven by subdued economic growth and diminished consumption in both industrial and jewellery sectors. In contrast, demand for coins and bars is anticipated to rise by 18%, bolstered by a resurgence in investment demand within the United States. Global silver supply is projected to decrease by 2%. Silver prices have declined by 35% from their peak of $121.60 per ounce in January, a significant drop following the remarkable 147% surge in 2025.
Silver holdings in London vaults rose by 0.5% month on month, reaching 28,213 tonnes at the conclusion of July 2026, with a valuation of $52.7 billion. Technically, the market is experiencing new selling pressure, as open interest has increased by 7.24% to 20,688 contracts, while prices have decreased by Rs 10,879. Silver has support at Rs 204,380, below which prices could test Rs 200,420. Resistance is positioned at Rs 215,890, and a sustained movement above this threshold could propel prices toward Rs 223,440.
