Silver prices extended their steep decline on Monday and Tuesday, with XAG/USD sliding to around $74.20–$75.00 per troy ounce, as a confluence of bearish catalysts—led by the Federal Reserve’s increasingly hawkish rhetoric and India’s surprise silver import clampdown—hammered the precious metal. The selloff, now in its third consecutive session, underscores how shifts in monetary policy expectations and global trade flows can quickly unwind gains in non-yielding assets.
Federal Reserve’s hawkish shift fuels dollar, yields
The primary driver of silver’s weakness is a clear pivot in Fed communications. Several regional Fed presidents have stressed that elevated interest rates may need to persist—or even rise—to combat stubborn inflation still above the central bank’s 2% target. Markets are now pricing in the chance of another rate hike later this year, a dramatic reversal from earlier hopes of cuts. This hawkish turn has boosted the U.S. Dollar Index and pushed Treasury yields higher, directly raising the opportunity cost of holding zero-yield commodities like silver. The metal has shed roughly 8% from its recent peak near $82.00.
India’s near-total import curb darkens demand outlook
Adding fuel to the selloff, India—one of the world’s largest silver consumers—announced late Friday a near-total restriction on silver imports, a move aimed at easing pressure on the rupee and increasing domestic supply. While local premiums may rise, the sudden absence of one of the biggest international buyers is widely seen as a bearish shock for global silver prices. Analysts warn that the policy could distort global demand flows and weigh heavily on the broader market, especially as industrial sentiment already weakens.
UBS slashes deficit forecast, eroding scarcity thesis
In a further blow, UBS cut its global silver investment demand outlook and sharply reduced its estimate for the physical market deficit. The bank now sees a shortfall of just 60–70 million ounces, down from previous projections of around 300 million ounces. The downgrade reflects higher mine output and softer industrial demand, effectively dismantling one of the key bullish narratives—a severe supply crunch—that had supported prices earlier in the year.
Geopolitical tensions fail to offer safe-haven bid
While ongoing geopolitical risks involving the Strait of Hormuz, Iran, and Taiwan typically boost precious metals, silver’s dual role as an industrial metal has left it unusually vulnerable. Unlike gold, silver derives roughly half its demand from manufacturing (electronics, solar panels, etc.), making it more sensitive to global growth fears. Thus, the broader risk-aversion wave instead punished silver alongside other cyclical assets.
Technical levels: $75.00 as a critical floor
Technically, the $75.00 level is a psychological and chart-based support that held multiple times in the past. A decisive break below could open the path toward $72.00 (2024 low). Resistance now stands at $78.50 and the 50-day moving average near $80.00. Momentum indicators such as the daily RSI hover near 40, signaling bearish momentum without being oversold, suggesting more downside is possible if macro headwinds persist.
For investors, the selloff highlights the precious metal’s acute sensitivity to interest rate expectations and industrial cycles. The Fed’s June meeting will be the next major trigger—any hint of a dovish pivot could spark a sharp reversal, while continued hawkishness may keep XAG/USD under pressure for months.
