Silver Caught Between Hawkish Fed and Vanishing Stockpiles as India Clamps Down

The precious metal is navigating a deeply fractured market. On one side, macro headwinds from rising interest rate expectations and a strengthening dollar are pressuring prices lower. On the other, physical supply is tightening at a pace that has industrial buyers scrambling for material. The result is a narrow trading range that could break in either direction once the next catalyst emerges.

Currently trading around $76 per ounce, silver suffered a near 2% drop on Tuesday as US bond yields climbed. The trigger was a Middle East energy shock that reignited inflation fears, prompting Federal Reserve officials to strike a more hawkish tone. A firm dollar further depressed the zero-yield metal. Yet even as paper markets sold off, the physical story remained starkly different. The Silver Institute projects a sixth consecutive annual supply deficit of over 46 million ounces this year, with above-ground reserves dwindling rapidly. Mine output is stagnating while industrial demand from photovoltaics, AI infrastructure, and electric vehicles continues to grow.

Meanwhile, a major demand shock is playing out in Asia. India, which sources roughly 80% of its silver needs from abroad, has drastically tightened import rules since mid-May. Licenses are now required for high-purity bars, effectively restricting more than 90% of shipments. On top of that, import duties on gold and silver were hiked from 6% to 15% as New Delhi moves to stem currency outflows and protect the rupee. The combined effect has slammed the brakes on one of the world’s largest silver buyers, creating a visible drag on global trade flows.

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HSBC has taken note. The bank raised its 2025 average price forecast for silver from $68 to $75 per ounce, but warned that upside remains capped. Its analysts see the global supply deficit shrinking by nearly half this year to 73 million ounces, with the gap narrowing further through 2027. Weakness in the jewellery sector and saturation in some industrial segments are undermining the bull case. Still, total physical demand is expected to rise 20% in 2025 to a three-year high, with half of that volume coming from industry. On the supply side, relief is years away: new mines take seven to ten years to reach full capacity.

Technically, silver is testing a critical support zone just below $77. A decisive break below that level could trigger a slide toward $70. On the upside, resistance at $80 is blocking any quick recovery. Despite the recent correction, the metal is still up over 130% year-to-date from its January record high above $121. With US core inflation stuck at 2.8% and a June rate cut all but ruled out, the market is rangebound between roughly $74 and $78. The next move likely hinges on the upcoming Fed minutes and whether physical tightness can overpower the macro drag.

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