Silver prices may remain capped unless US-Iran talks improve, says analyst

Silver: Vulnerable as oil prices climb yet again

Performance

On May 21, spot silver gave back its intra-day gains to edge lower as oil prices spiked higher on renewed uncertainty over the US-Iran negotiations.

 

Reuters reported that Iran intends to keep its uranium, which has always been a key sticking issue in the US-Iran negotiations.

 

At the time of writing, the white metal was trading at 75.33, down by 0.7 per cent for the day.

 

In the week ending May 15, the counter declined by 5 per cent to $75.99.

Geopolitics and oil

On May 21, Tehran said that the latest proposal from Washington had partly bridged the gap between the two sides — a positive development — which was negated by the news that Iran plans to keep its uranium.

 

 

Reuters reported on May 21 that Iran's Supreme Leader Mojtaba khamenei had issued a directive that the country’s near-weapons-grade uranium should not be sent abroad.

 

Iran is discussing with Oman how to set up some form of a permanent toll system that will formalise its control of maritime traffic through Hormuz.

 

US President Trump, in response to Iran’s uranium stance, said that the US can take Iran's uranium and destroy it. He added that the Strait of Hormuz should remain free of tolls.

Data roundup

S&P Global US manufacturing PMI rose from 54.50 to 55.5 (estimate: 53.80) in its May preliminary reading, recording the fastest expansion in four years. However, it could be a temporary boost as customers try to get ahead of war-related inflation.

 

Services PMI stagnated at 51.7 versus the forecast of 51.8.

 

The weekly job report was somewhat positive as jobless claims fell from 212k to 209k (forecast: 210k), while continuing claims rose from 1776k to 1782k versus the forecast of 1786k.

 

April housing starts fell 2.8 per cent m-o-m (forecast: 5.3 per cent).

 

The Philadelphia Fed Business Outlook Index unexpectedly contracted in May after rising to the highest level since January 2025.

 

The Eurozone's May composite PMI fell from 48.80 to 47.7, the worst reading since November 2023, as services PMI contracted more than expected.

 

The Uk fared even worse as May composite PMI tumbled from 52.6 in April to 48.50 (forecast: 51.60), marking the fastest contraction in a year.

ETF and inventory

As of May 20, total known silver ETF holdings stood at 794.80 MOz, down by 8.56 per cent YTD as investors dumped their ETF holdings in the wake of the Iran conflict, as high oil prices killed the Fed rate cut chances.

 

ETF holdings have seen a net outflow of 37.2 MOz since the beginning of the Iran war.

 

COMEX's registered silver inventory at 81.67 MOz is down by 60 per cent from the record peak of 201 MOz seen in September 2025.

Silver lease rate

The one-month LBMA silver lease rate at 0.27 per cent is in line with the historical standard and does not indicate any tightness in the market.

China's silver market

Shanghai Gold Exchange silver is trading around $84/Oz, at a premium of nearly 10 per cent to the LBMA spot price.

 

Silver stock at the Shanghai Futures Exchange stands at 989 tons, the lowest in a decade, but up nearly 400 per cent from the cycle low of 252 tons reached in March.

 

India tightens silver import rules to ease pressure on forex reserves

 

Bloomberg reported that India has imposed fresh restrictions on imports of most silver products to support the weakening rupee.

 

Under a May 16 notification issued by the Directorate General of Foreign Trade, several silver product categories were shifted from the "free" to the "restricted" import category.

 

Imports of silver bars containing 99.9 per cent or more silver by weight, along with other categories of silver bars, will be subject to regulations set by the Reserve Bank of India.

Upcoming data

Major US data on deck in the short run include May University of Michigan Sentiment and inflation expectations (May 22), ADP weekly employment change (May 26), May Conference Board Consumer Confidence (May 26), April real personal spending, April PCE Price Index, and the final 1Q GDP reading (May 28).

 

Traders will also monitor Japan's May national CPI (May 22) and Germany's final 1Q GDP reading (May 22).

Outlook

Silver remains vulnerable unless we see reassuring developments in US-Iran talks.

 

Despite India's measured silver import restrictions, domestic spot silver prices do not show supply concerns.

 

Disappointing April industrial production and retail sales data out of China, along with weak European PMIs, are points of concern in the near term.

 

In the present scenario, upside in silver is expected to remain capped barring clear and material developments aiding constructive US-Iran negotiations.

 

It is advisable to sell into rallies with a tight stop-loss. Support is at $73, a breach of which will put $69 into the bears' crosshairs. Resistance is at $80.  ============================= 

(Disclaimer: This article is written by Praveen Singh, head of commodities, Mirae Asset Sharekhan. Views expressed are his own.)