Silver futures continued their downward trajectory on Monday, sliding to Rs 2.7 lakh per kilogram as a rally in crude oil prices stoked inflation concerns among investors. On the Multi Commodity Exchange (MCX), the white metal for July delivery depreciated by Rs 1,832, or nearly 1 percent, to Rs 2,70,054 per kilogram, extending losses for the third consecutive session.
Market Dynamics
The decline in silver prices comes amid a broader sell-off in precious metals, driven by expectations that central banks may tighten monetary policy to combat rising inflation. A sustained rally in oil prices has added to inflationary pressures, prompting investors to reassess their positions in non-yielding assets like silver.
Impact of Crude Oil Rally
Crude oil prices have surged to multi-year highs, fueled by supply constraints and robust demand. This has raised concerns that higher energy costs could feed into broader inflation, potentially forcing central banks to accelerate interest rate hikes. Higher interest rates increase the opportunity cost of holding precious metals, which do not offer any yield.
Technical Outlook
From a technical perspective, silver has been under pressure after failing to hold above key resistance levels. The recent breakdown below Rs 2,72,000 per kilogram has opened the door for further downside, with the next support seen near Rs 2,68,000. Analysts suggest that if inflation concerns persist, silver could test lower levels in the coming sessions.
Global Cues
Globally, spot silver was trading lower, tracking weakness in gold and other commodities. The dollar index remained firm, adding to the headwinds for precious metals. Market participants are now awaiting key economic data and central bank commentary for further direction.
Despite the near-term weakness, some analysts remain bullish on silver in the long term, citing its industrial demand in sectors like solar energy and electronics. However, the immediate focus remains on inflation trends and monetary policy responses.
