Silver tumbles Rs 8,158 as dollar strength dents bullion demand

Silver futures fell sharply by over 3 per cent to Rs 2.26 lakh per kg, tracking global weakness amid a strong US dollar and rising Fed rate hike expectations. Analysts cited pressure from elevated bond yields and weak overseas demand

New Delhi: Silver futures retreated by Rs 8,158 to Rs 2.26 lakh per kg, tracking weak global trends amid a strong dollar and rising expectations of higher interest rates by the US Federal Reserve.

On the Multi Commodity Exchange (MCX), the white metal for July delivery slumped by Rs 8,158, or 3.48 per cent, to Rs 2,26,152 per kilogram in a business turnover of 10,059 lots.

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Similarly, the September contract also plunged by Rs 8,629, or 3.59 per cent, to Rs 2,31,509 per kg in 6,291 lots.

Analysts said bullion sentiment remained under pressure as traders reassessed the outlook for US monetary policy amid a rally in the dollar and elevated Treasury bond yields.

“Silver prices moved lower in the domestic markets, as a stronger US dollar and rising expectations of a further interest rate hike by the Federal Reserve weighed on investor sentiment,” Navneet Damani, Head of Research – Commodities at Motilal Oswal Financial Services Ltd, said.

The dollar index is close to a one-year high, following the possibility of a Fed rate hike as early as September and elevated Treasury bond yields, he added.

The weakness in domestic markets mirrored a sharp selloff in overseas trade.

In international markets, Comex silver futures for July delivery fell USD 3.57, or 5.45 per cent, to USD 62.01 per ounce in New York.

“Silver saw a sharper decline in overseas trade, dropping to USD 62 per ounce level as uncertainty surrounding US-Iran peace talks weighed heavily on market sentiment,” Gaurav Garg, Research Analyst at Lemonn Markets Desk, said.

Market participants also weighed developments in the global energy market after the US granted Iran a 60-day license to sell oil, raising expectations of a quick recovery in crude supplies.

Traffic through the Strait of Hormuz has improved, while producers such as Kuwait and the United Arab Emirates have stepped up efforts to secure alternative routes.

Meanwhile, investors are awaiting fresh inflation signals from Washington.

“Traders will focus on the upcoming Personal Consumption Expenditures report, the Fed’s preferred inflation measure, which is expected to shed fresh light on underlying price pressures,” Renisha Chainani, Head of Research at Augmont, said.