Silver's Fractured Outlook: India's Tariff and UBS's Supply Recalibration Weigh on a Tight Market

The silver market is navigating a rare collision of forces this week. On one side, India’s 15% import tariff is chilling physical demand from the world’s second-largest consumer. On the other, UBS has slashed its deficit forecast by more than three-quarters, puncturing the supply-strait narrative that had propped up prices for much of the year. The spot price has steadied between $75.20 and $75.82, a fragile attempt at recovery after a sharp sell-off, but the conflicting signals are keeping traders on edge.

India’s new levy on precious metals, aimed at shoring up the rupee and curbing capital outflows, directly threatens a market that accounts for nearly 11% of the country’s total import bill. Silver is heavily used there for jewelry and industrial applications, and the sudden cost increase is prompting dealers to scale back forward purchases. That physical headwind arrives just as the Federal Reserve’s tightening cycle continues to loom large, with US CPI for April printing at 3.8% — above expectations — effectively snuffing out hope of an early rate cut.

Yet the story is not uniformly bearish. UBS’s revised estimates, while sobering, still project a deficit in the high tens of millions of ounces for 2026, down from an earlier call of 300 million. The bank now sees global mine supply at roughly 850 million ounces next year, with weaker demand from the solar sector, lower jewelry and silverware purchases, and reduced investor outflows all contributing to the narrower gap. Its year-end 2026 target falls from $85 to $80, and for the second quarter of 2026 the target drops even more sharply from $100 to $85. The bank expects largely sideways trade for the remainder of this year.

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HSBC offers a more constructive counterpoint. The British lender has lifted its average 2026 forecast from $68.25 to $75, citing robust industrial demand, though it sees the metal ending that year at $70 — below current levels. The divergence between the two houses underscores the uncertainty around supply dynamics. HSBC forecasts the global shortfall narrowing from 143 million ounces to about 73 million, driven by higher mine output and increased recycling, a view that broadly aligns with UBS’s downward revision.

Meanwhile, physical inventory at COMEX tells a different story. Registered silver stocks stood at roughly 81.6 million ounces on 18 May, a multi-quarter low. More than 34 million ounces have left the exchange’s vaults since the start of the year, a signal of persistent demand for delivery. That tightening at the front end contrasts with the longer-term picture painted by the analysts and prevents the price weakness from being dismissed as a routine rate-driven adjustment.

Macro pressures remain acute. The yield on the 10-year US Treasury note climbed to 4.667%, while long-dated paper hit levels not seen since 2007, as markets repriced rate expectations. The dollar index hovered near the 99 mark, making dollar-denominated commodities more expensive for non-US buyers. With silver offering no income stream, higher real yields continue to steer capital toward bonds and the greenback.

Technically, the metal is on shaky ground after breaking its uptrend channel. The RSI sits at 31, just above oversold territory, and the MACD is negative. Support at $71 is the key line to watch on the downside; a sustainable recovery would need to clear $76.33 and then $78.25 to regain credibility. The industrial case remains intact — defense, electronics, and solar all rely on silver in meaningful volumes, and US domestic supply cannot cover demand — but for now, the combination of Indian import curbs, a hawkish Fed, and a recalibrated deficit outlook is keeping the bears firmly in control.

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