Macroeconomic Headwinds and US Monetary Policy
- The US-Iran conflict and rising energy prices have fueled inflation expectations, prompting a reassessment of US monetary policy (p. 1).
  - Markets now price in at least one Fed rate hike before the end of 2026, compared to expectations of two rate cuts at the start of the year (p. 1).
  - Three Fed officials dissented in favor of an immediate rate hike at the July FOMC meeting, and the Fed abandoned forward guidance (p. 1).
  - US 10-year real yields rose from approximately 1.7% before the conflict to 2.4%, while the 30-year yield reached its highest level since 2007 (p. 1).
Precious Metals Market Performance
- Higher real yields have increased the opportunity cost of holding non-yielding assets, weighing on investment demand (p. 3).
- Silver has fallen by more than 35% since late February, underperforming gold due to its volatility and exposure to the industrial cycle (p. 3).
  - Silver's net managed money long positions fell to a three-month low of 1.43Moz (p. 1).
- Gold hit one-month highs above $4,200 as hopes of a US-Iran peace deal tempered inflation concerns (p. 1).
- Platinum one-month lease rates fell below 2%, reaching their lowest level since December 2024 (p. 1).
- Toyota's global sales in H1 2026 fell 2.9% y/y to 5.01m units, and production dropped 1.2% y/y to 4.86m units (p. 1).
Easing Physical Silver Demand and Rising Inventories
- Freely available silver stocks in London vaults rose to 272Moz by the end of June, the highest level since December 2024 and double the end-September 2025 low (p. 3).
- CME approved warehouse inventories have slowly crept up since May, indicating softening demand in the US (p. 3).
- Retail investment slowed sharply, with primary sales of silver bullion coins by leading mints falling 82% q/q and 63% y/y in Q2 2026, marking the lowest quarterly total since 2010 (p. 3).
Collapse in Indian Silver Imports
- India raised its import duty on gold and silver from 6% to 15% in May and restricted refined silver imports under all HS codes (p. 5).
  - All forms of silver except silver doré now require an import license issued by the Directorate General of Foreign Trade (p. 5).
- Indian silver imports fell to 47t in May (-91% y/y) and 37t in June (-83% y/y) (p. 5).
- H1 2026 imports totaled 1,874t, representing a three-year low and 25% below the 10-year average (p. 5).
- While local demand is expected to improve, a full recovery in imports is unlikely under the current regime, though India will still likely need 2,000-3,000t of imports to satisfy annual demand (p. 5).
Future Outlook
- Near-term US monetary policy expectations will remain the dominant driver of silver prices (p. 5).
  - The base case assumes the Fed will keep interest rates unchanged for the remainder of 2026 (p. 5).
  - Silver remains vulnerable to further downside in the coming weeks due to inflationary pressures from the Middle East conflict (p. 5).

Macroeconomic Headwinds and US Monetary Policy
- The US-Iran conflict and rising energy prices have fueled inflation expectations, prompting a reassessment of US monetary policy (p. 1).
  - Markets now price in at least one Fed rate hike before the end of 2026, compared to expectations of two rate cuts at the start of the year (p. 1).
  - Three Fed officials dissented in favor of an immediate rate hike at the July FOMC meeting, and the Fed abandoned forward guidance (p. 1).
  - US 10-year real yields rose from approximately 1.7% before the conflict to 2.4%, while the 30-year yield reached its highest level since 2007 (p. 1).
Precious Metals Market Performance
- Higher real yields have increased the opportunity cost of holding non-yielding assets, weighing on investment demand (p. 3).
- Silver has fallen by more than 35% since late February, underperforming gold due to its volatility and exposure to the industrial cycle (p. 3).
  - Silver's net managed money long positions fell to a three-month low of 1.43Moz (p. 1).
- Gold hit one-month highs above $4,200 as hopes of a US-Iran peace deal tempered inflation concerns (p. 1).
- Platinum one-month lease rates fell below 2%, reaching their lowest level since December 2024 (p. 1).
- Toyota's global sales in H1 2026 fell 2.9% y/y to 5.01m units, and production dropped 1.2% y/y to 4.86m units (p. 1).
Easing Physical Silver Demand and Rising Inventories
- Freely available silver stocks in London vaults rose to 272Moz by the end of June, the highest level since December 2024 and double the end-September 2025 low (p. 3).
- CME approved warehouse inventories have slowly crept up since May, indicating softening demand in the US (p. 3).
- Retail investment slowed sharply, with primary sales of silver bullion coins by leading mints falling 82% q/q and 63% y/y in Q2 2026, marking the lowest quarterly total since 2010 (p. 3).
Collapse in Indian Silver Imports
- India raised its import duty on gold and silver from 6% to 15% in May and restricted refined silver imports under all HS codes (p. 5).
  - All forms of silver except silver doré now require an import license issued by the Directorate General of Foreign Trade (p. 5).
- Indian silver imports fell to 47t in May (-91% y/y) and 37t in June (-83% y/y) (p. 5).
- H1 2026 imports totaled 1,874t, representing a three-year low and 25% below the 10-year average (p. 5).
- While local demand is expected to improve, a full recovery in imports is unlikely under the current regime, though India will still likely need 2,000-3,000t of imports to satisfy annual demand (p. 5).
Future Outlook
- Near-term US monetary policy expectations will remain the dominant driver of silver prices (p. 5).
  - The base case assumes the Fed will keep interest rates unchanged for the remainder of 2026 (p. 5).
  - Silver remains vulnerable to further downside in the coming weeks due to inflationary pressures from the Middle East conflict (p. 5).

Silver under pressure as Fed repricing and physical weakness take hold

Interactive reader

Silver under pressure as Fed repricing and physical weakness take hold

Interactive reader