Whalesbook
Geopolitical Tensions Hit Silver Prices
Silver prices saw earlier gains erased on May 21, falling 0.7% to trade at $75.33. The decline was driven by rising geopolitical uncertainty related to US-Iran discussions and a surge in oil prices. Market observers are watching Iran's stance on uranium exports and its talks with Oman about the Strait of Hormuz. Tensions escalated as the US President indicated potential seizure and destruction in response to Iran's uranium position.
Oil Prices Climb Amid Iran's Strategic Moves
Heightened tensions pushed oil prices higher, a key indicator of geopolitical stability. While Iran signaled partial agreement with a US proposal, its Supreme Leader also issued directives on uranium exports. Reports surfaced that Iran is considering a permanent toll system for maritime traffic through the vital Strait of Hormuz.
Mixed Economic Signals
Economic data offered a mixed picture. The US manufacturing sector saw strong growth, with the S&P Global US manufacturing PMI hitting a four-year high of 55.5 in May, though the services sector PMI held steady at 51.7. Weekly jobless claims slightly decreased to 209,000, but continuing claims edged up. Separately, April housing starts dropped 2.8% month-over-month, and the Philadelphia Fed Business Outlook Index unexpectedly contracted. In contrast, Eurozone and UK composite PMIs fell sharply in May, signaling the steepest contraction in a year for the UK economy.
Investor Sentiment and Inventory Levels
Investor sentiment turned cautious, leading to outflows from silver-backed Exchange Traded Funds (ETFs). Year-to-date, total known silver ETF holdings have fallen 8.56% to 794.80 million ounces as of May 20. Net outflows of 37.2 million ounces have occurred since the Iran conflict began and expectations for Federal Reserve rate cuts diminished. COMEX registered silver inventory has also dropped 60% from its September 2025 peak.
India's Import Restrictions
To support its weakening rupee, India has tightened import rules for various silver products. The Directorate General of Foreign Trade has reclassified several items, including 99.9% purity bars, into a "restricted" import category, requiring approval from the Reserve Bank of India. This measure, aimed at currency stability, adds another dynamic to global silver supply.
Market Outlook
Silver's price movement remains closely tied to the volatile US-Iran geopolitical situation. While India's import curbs are noted, immediate domestic supply issues in India do not appear to be a concern. Weak economic indicators from China and Europe contribute to a cautious near-term outlook for silver. Investors are advised to trade cautiously, considering selling on rallies with strict stop-loss measures. Key support is seen at $73, with resistance expected around $80.