Silver prices experienced a significant decline of 5.45%, closing at Rs 179,132. This downturn was influenced by ongoing US inflation, robust economic growth, and anticipations of additional monetary tightening by the Federal Reserve. The US PCE price index experienced a month-on-month increase of 0.5% in September, marking its most significant rise since March. Concurrently, annual inflation accelerated to 3.6%, and core PCE inflation rose to 3.1%. Meanwhile, US GDP expanded by 3.4% in the third quarter, exceeding expectations of 3.2%, supported by robust consumer spending and investments related to artificial intelligence.
Despite the Federal Reserve’s decision to maintain interest rates, market expectations indicate a nearly 75% likelihood of a rate increase in December, which is exerting downward pressure on precious metals. HSBC anticipates a notable contraction in the silver market deficit, projecting a decrease from 140 million ounces in 2025 to merely 5 million ounces in 2026. This expectation is attributed to an increase in mine supply, greater availability of scrap, and enhanced recycling efforts, coupled with a decline in demand from industrial sectors and jewellery. However, the Silver Institute and Metals Focus anticipate that the market will experience its sixth consecutive annual deficit, with the shortfall expected to expand to 46.3 million ounces in 2026, up from 40.3 million ounces in 2025.
Total demand is projected to decrease by 2%, with industrial fabrication potentially declining by 3% to reach a four-year low. This decline may be partially mitigated by an 18% rebound in demand for coins and bars. Despite enhanced market liquidity due to the return of metal from US inventories, around 762 million ounces have been withdrawn from global stocks since 2021, underscoring persistent supply constraints. Meanwhile, silver holdings in London vaults rose by 1.95% month-on-month, reaching 28,985 tonnes at the conclusion of September.
Technically, the market is experiencing new selling pressure, with open interest rising by 1.36% to 18,105 contracts, while prices have decreased by Rs 10,321, suggesting the establishment of new short positions. Silver is presently encountering support at Rs 175,880, beneath which prices may challenge Rs 172,620. On the upside, resistance is positioned at Rs 185,330, and a sustained movement above this level could propel prices toward Rs 191,530.
