Silver concluded the trading session with a gain of 0.97%, reaching Rs 225,877. This increase was bolstered by US PCE inflation data that came in softer than anticipated, leading to diminished expectations for a Federal Reserve rate hike in October. The US PCE price index experienced a 0.3% increase in August, falling short of the anticipated 0.4%. Meanwhile, core PCE saw a rise of 0.2%, which also did not meet the forecasted 0.3% increase. Markets currently assign approximately a 38% likelihood to an October rate hike, a decrease from 51% prior to the data release, while the anticipation for a December increase hovers around 89%. However, Treasury yields remained close to multi-decade highs due to concerns regarding ongoing energy-driven inflation. US weekly jobless claims decreased by 1,000 to 197,000, falling short of the anticipated 200,000, underscoring the ongoing strength of the labour market.
Federal Reserve officials exhibited a measured approach, as Michael Barr endorsed additional rate increases, whereas Beth Hammack pointed to elevated energy prices, investments in artificial intelligence, and apprehensions regarding government debt as contributors to the persistently high long-term yields. John Williams stated that an additional rate hike by year-end appears to be a plausible scenario. London silver vault holdings reached 28,213 tonnes at the end of July, reflecting a month-on-month increase of 0.5% and valued at $52.7 billion, which corresponds to roughly 940,423 bars. The global silver market is poised to experience its sixth consecutive structural deficit, having seen 762 million ounces withdrawn from stocks since 2021.
The deficit is anticipated to expand to 46.3 million ounces in 2026, up from 40.3 million in 2025, even as total demand declines by 2%, reflecting a downturn in industrial and jewellery consumption. Industrial fabrication is projected to decrease by 3%, whereas demand for coins and bars may increase by 18%. Total supply is projected to decline by 2%, reinforcing the fundamental deficit. Silver continues to trade significantly lower than its January peak of $121.6 per ounce, following a remarkable 147% increase in 2025. However, enhanced liquidity and declining demand from India have alleviated earlier supply constraints.
Technically, the market is experiencing short covering, as evidenced by a 4.61% decline in open interest to 16,584, while prices increased by Rs 2,171. Silver is currently encountering support around Rs 224,295, and a decline beneath this threshold may reveal Rs 222,715. Resistance is positioned at Rs 227,175, and a sustained movement above this threshold could propel prices toward Rs 228,475.
