Silver Prices Plunge Amid Rising Oil Costs and Tightening Monetary Policy
The silver market is experiencing downward pressure due to surging oil prices and expectations of a tighter Federal Reserve monetary policy. Oil prices have reached four-month highs after Saudi Arabia shut a key pipeline used to bypass the Strait of Hormuz, adding to inflationary pressures from the ongoing Middle East crisis.
Markets are pricing in around an 87% probability of a 25-basis-point Fed rate hike on Wednesday, which is contributing to the decline in silver prices. The US consumer inflation remained at 3.4% in August, while monthly CPI increased 0.4%, its strongest rise in three months.
The global silver market is expected to remain in structural deficit for a sixth consecutive year, with 762 million troy ounces drawn from stocks since 2021. The 2026 deficit is projected to widen to 46.3 million ounces from 40.3 million in 2025, despite total demand declining 2%.
Technically, the silver market is under fresh selling pressure, with open interest rising 2.13% to 13,559 while prices declined ₹2,284, indicating fresh short positions entering the market. Silver is currently finding support near ₹230,475, and a sustained break below this level could extend the decline toward ₹228,255.