Silver Defies India's Import Crackdown as Industrial Demand Holds the Line

Silver shook off a fresh regulatory blow from one of its biggest buyers on Tuesday, climbing 2.6% to around $78.60 an ounce after earlier trading at $77.50. The gains came despite India imposing strict licensing requirements on high-purity silver bars since mid-May, effectively blocking over 90% of the country's imports, and raising import duties on gold and silver from 6% to 15%. India, which covers roughly 80% of its silver needs abroad, is trying to stem currency outflows and defend the rupee.

The rally marks a recovery from Friday's close of $76.46, even as contradictory forces pull at the market. The US dollar strengthened, bond yields rose, and April's core inflation printed a sticky 2.8%, extinguishing hopes for a June rate cut from the Federal Reserve. Some traders are now pricing in a rate increase by December. Yet silver managed to become the best performing precious metal of the day, a sign that industrial demand continues to act as a shock absorber.

The global supply deficit is narrowing fast, but the numbers differ depending on the source. UBS slashed its forecast for silver investment demand from over 400 million ounces to 300 million, and now sees the overall market deficit falling to just 60–70 million ounces, a sharp drop from an earlier estimate of around 300 million. HSBC is slightly more optimistic, predicting a deficit of 73 million ounces this year, while revising its average price forecast for 2025 up to $75 from $68, though it expects prices to ease next year.

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What keeps silver resilient is its industrial backbone, which accounts for more than half of total demand. Global physical silver purchases are on track to rise 20% this year, hitting a three-year high. The photovoltaic sector alone swallows 230 million ounces annually. Electric vehicles and the semiconductor boom, fueled by AI, are also supporting consumption. On the supply side, any relief is years away — exploration firms such as Barton Gold are drilling in Australia, but new mines typically need seven to ten years to reach full capacity.

The jewelry segment is weakening and some industrial sectors show signs of saturation, but the broader demand picture remains robust. The gold-silver ratio, now around 59 after recovering from a trough of 43, still suggests silver has room to play catch-up. The average analyst projection for 2026 stands at $79.57 an ounce, above current levels.

Short-term, silver is trapped in a $74 to $78 range. The next catalyst will likely come from the Federal Reserve’s meeting minutes, which could determine whether a breakout materializes. Macro headwinds — higher real yields and a strong dollar — will keep the metal under pressure, but the industrial demand floor and supply constraints may prevent a deep slump. For now, silver is walking a tightrope between New Delhi's protectionism, central bank policy, and its own structural growth story.

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