On Thursday, May 21st, silver prices climbed above $76.90 per ounce before retreating, currently trading around $75.50 with a decline of nearly 0.3%. This movement reflects a clash of key fundamental forces in the market.

India Significantly Tightens Silver Imports In an effort to curb precious metals imports, alleviate pressure on foreign exchange reserves, and support the Indian rupee, the Indian government has recently implemented a series of restrictions on silver imports. On the tariff front, effective May 13th, the government raised the import duty on silver substantially from 6% to 15% (comprising a 10% basic customs duty and a 5% Agriculture Infrastructure and Development Cess). As the world's second-largest consumer of precious metals, India's imports of gold and silver require significant dollar outflows. Against a backdrop of rising oil prices due to geopolitical tensions, declining foreign exchange reserves (down nearly $38 billion since the onset of conflict), and the rupee hitting a record low of 96.18 against the dollar, this measure aims to quickly reduce the current account deficit and stem foreign currency outflow. On the non-tariff barrier front, the government further reclassified silver bar imports from "free" to "restricted," stipulating that only consignments with permits issued by the Directorate General of Foreign Trade are allowed. This restricted category covers silver bars and semi-manufactured forms with purity above 99.9%, accounting for over 90% of India's total silver imports. Furthermore, the issuance of future import permits will be linked to a company's export performance.

Global Silver Faces Sixth Consecutive Year of Shortage, Deficit Widens 15% While India's policies are tightening the tap on demand, the global supply side for silver is experiencing a different dynamic—years of consecutive supply deficits and depleting inventories. According to the World Silver Institute's annual outlook report released in April 2026, the global silver market is projected to face a supply shortfall for the sixth consecutive year, with the 2026 deficit expected to widen by 15% to 46.3 million troy ounces. On the supply side, a slight decline in mine production, coupled with supply disruptions in major producing countries like Peru, is forecast to lead to a 2% drop in total supply. On the demand side, despite some softening in industrial, jewelry, and silverware consumption, investment demand for bars and coins is projected to surge by 18%. Demand for silver in sectors such as photovoltaics, AI computing infrastructure, and new energy vehicles is expected to remain at historically robust levels.

Inventory Depletion: Exacerbating Market Fragility The existence of a supply deficit is not new, but more concerning is the rapidly declining "water level" of inventories. Global visible silver inventories have fallen to critical levels. Industry data indicates that the combined deliverable stock across the LBMA, COMEX, and Shanghai Futures Exchange totals less than 16,000 tonnes, sufficient to cover only about 1.2 months of global industrial consumption. This is far below the industry's safety stock standard of 3-6 months. The LBMA's deliverable silver stockpile has plummeted by approximately 75% from its 2019 peak, indicating extreme fragility in market liquidity. Philip Newman, Managing Director of Metals Focus, warned that conditions for a new physical silver squeeze indeed exist. Overall weakening liquidity could lead to greater volatility in lease rates, and price swings may exceed investors' previous expectations.

Peru's Energy Crisis Impacts Silver Supply: Capacity Could Drop 3%-10%, Widening the Deficit With inventories already a pressing concern, supply disruptions in a major producing country like Peru add further strain to an already fragile chain. On May 11, 2026, the Peruvian government formally declared an energy crisis emergency decree, citing domestic power supply constraints and restricted industrial natural gas quotas. The state of emergency is effective until December 31, 2026. As the world's third-largest silver producer, with 2025 mine supply reaching 4,063 tonnes (approximately 15.4% of global output), Peru's silver is predominantly a by-product of copper mining. The entire process, from mining and processing to smelting, is highly dependent on stable electricity and energy supplies. Under the dual constraints of power and natural gas, industrial electricity usage for mines faces strict limitations, directly impacting the energy-intensive extraction and processing stages. Multiple estimates suggest Peru's silver mining capacity utilization could drop by 12-15%, leading to an annual supply shortfall of 490-610 tonnes. This represents about 3-5% of its annual production, or 1.8-2.2% of global annual output. When combined with a simultaneous contraction in by-product silver from copper, lead, and zinc smelting, the actual impact could be even more pronounced.

Bull and Bear Forces in Play, Silver Prices Experience Short-Term Volatility In summary, the silver market is currently caught in a tug-of-war between multiple forces: contracting demand from India, global supply shortages, critically low inventories, and supply disruptions in a major producer. The price retreat from above $76.90 reflects the ongoing battle between bulls and bears interpreting these fundamental factors. In the short term, the conflict between demand suppression from Indian policies and tight global supply will likely remain the core driver of silver price volatility.

Price Breaks Below Short-Term Moving Average, Indicating Weakness From a 60-minute chart perspective, spot silver is currently trading around $75.50, a key level for short-term bull-bear contention, with several technical indicators showing neutral to consolidating signals. Regarding moving averages, the short-term MA20 ($75.68) sits above the current price, providing near-term resistance, while the MA100 ($76.55) and MA200 ($80.65) are positioned significantly higher. The current price has broken below the MA20, indicating a short-term bearish bias. As of the latest update, spot silver is reported at $75.47 per ounce.