Silver falls ahead of key Fed signals
Silver prices recently made a move back down and closed at Rs 194,325, down 1.22%. Traders are keeping their eyes on the policy signals from the US Federal Reserve and upcoming comments from Fed Chairman Wersch and managing the risks.
A stronger US dollar and rising Treasury yields have put obvious pressure on the white metal. Market participants are increasingly confident that interest rates can remain high for a long time. The dollar index hit a two-week high of 102.2, after gaining for three consecutive sessions.
US economic data and rate pictures
The Federal Reserve decided to leave interest rates alone in October, keeping interest rates in the range of 3.75% to 4.00%. The pause came on the heels of a 25-basis-point rate hike in September. However, not everyone on the board agreed. The two policymakers actually pushed for another rate increase immediately.
The central bank said domestic consumer spending remains strong, business activity is strengthening and inflation is taking longer than expected to subside. This leaves the door open to many surprises at future interest rate meetings.
Recent data prints from the US economy have supported that statement. Orders for manufactured long-life goods rose 1.8% month over month in September, beating the market's forecast of 1.5% growth. Building permits, on the other hand, fell 0.4% to an annual pace of 1.398 million.
As the dollar remains strong and bond yields remain high, market analysts have lowered their price targets for silver. Current forecasts show an average silver price of $66.75 an ounce in 2027, down from the earlier forecast of $70.30 for 2026, although a price correction is still on the cards for next year.
Physical Market Deficits and Supply Realities
Despite the short-term decline in market value, the underlying physical numbers tell a tough story. The silver market is headed for its sixth consecutive year of supply deficit. Projections show the supply shortfall growing to 46.3 million ounces in 2026, up from 40.3 million ounces in 2025.
Overall physical demand is likely to decline by about 2%. Slow activity in factories and weak retail jewelery buying are the main reasons for this. Nevertheless, everyday retail demand for silver coins and investment bars is bucking this trend, with a projected increase of 18%.
Industrial silver use is expected to fall 3% to a four-year low. Factory managers are remaining cautious due to macroeconomic headwinds and global supply chain disruptions. Total mine and scrap supply is also expected to decline by 2%, keeping total availability limited.
In London vaults, physical holdings of silver rose 1.95% to 28,985 tonnes as of the end of September, worth about $56.6 billion. Even with that short-term inventory surge, the massive outflows seen since 2021 show that the physical market is still quite tight.
Technical level worth seeing
From a chart perspective, fresh short positions have entered the market. Silver open interest rose 0.36% to 16,598 contracts while prices declined by Rs 2,392, pointing to active selling pressure in the near term.
Key price levels to track right now include:
- immediate assistance:Rs 193,370
- Secondary Support:Rs 192,410 (if first floor gives way)
- Main resistance:Rs 195,920
- Reverse target:Rs 197,510 (if buyers clear the resistance with strong volumes)
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Key Tips for Silver Traders
- Short-term adverse circumstances:A strong dollar index at 102.2 and steady US Treasury yields will keep bullish rallies in check until Fed policy intentions become clear.
- Long term supply crisis:A growing physical deficit of 46.3 million ounces in 2026 means long-term structural support remains in place despite falling prices.
- Critical Pivot:A close look at the support level of Rs 193,370. A clean break below could lead to a sharp decline to Rs 192,410.