Silver Drops as India Curbs, Fed Fear Hit XAG/USD Hard!

Key Moments

India’s Import Clampdown Hits Silver Market

Silver (XAG/USD) remains under pressure for a third consecutive day, changing hands around $74.20 per troy ounce during Asian trading on Monday. The move comes after India imposed immediate curbs on nearly all Silver imports in an effort to reduce inbound shipments and relieve pressure on the Indian Rupee.

The new restrictions are expected to tighten domestic availability and could drive up local market premiums. At the same time, a drop in Indian demand has the potential to weigh on international Silver prices.

Inflation Fears, Fed Outlook, and Stronger Dollar Pressure XAG/USD

The metal is also retreating as an energy shock in the Middle East fuels broader inflation concerns and strengthens expectations of higher interest rates from major central banks. The US Federal Reserve is moving toward a more forceful posture on inflation control.

Several Fed officials have recently stressed that keeping price pressures in check is their main objective, and have indicated that additional rate hikes could be warranted if inflation persists. Market participants have reacted by sharply repricing the odds of a December policy move, with the probability of a hike rising to nearly 48% from 14% just a week earlier, according to the CME FedWatch tool.

As a result, the dollar-denominated metal is facing headwinds from a firmer US Dollar, supported by increased risk aversion amid ongoing geopolitical strains.

Geopolitical Tensions Escalate, Boosting Energy Prices and Risk Aversion

Geopolitical risk remains elevated as the United States and Iran remain distant from an agreement to end weeks of hostilities and to reopen the critical Strait of Hormuz shipping lane.

US President Donald Trump has intensified the standoff by issuing a public warning to Iran to make progress or face new consequences. With the Strait still effectively shut, global oil prices continue to climb, creating a heavy economic load for countries that depend heavily on imported energy.

Investor unease is further amplified by cautions from Chinese leader Xi Jinping to President Trump that Taiwan could become a flashpoint for direct conflict between their two economies.

UBS Slashes Silver Demand Forecast and Deficit Projections

Market sentiment toward Silver is taking an additional hit from a bearish outlook by UBS strategists. The bank has lowered its projection for Silver investment demand from over 400 million ounces to 300 million ounces, citing softer industrial usage and increased mining supply.

In line with this downgrade, UBS now expects the global Silver market deficit to contract significantly to a range of 60–70 million ounces, compared with a previous estimate of 300 million ounces.