OCBC strategist Christopher Wong pointed out that silver recently plunged by about 9%, briefly falling below the $76/ounce mark, a correction far exceeding that of gold. He attributed silver's previous rise to the strength of industrial metals and the AI-driven stock market rally, but noted that rising US Treasury yields and a stronger dollar have reversed this support.



Huang currently emphasizes that market sentiment for silver is fragile, and downside risks continue to accumulate.

Silver prices plummeted, falling far more sharply than gold.

In his report, Huang pointed out that silver experienced a more dramatic decline. Silver's previous rise was attributed to multiple factors: the strength of industrial metals and the spillover effect of AI-driven stock market gains—the rally in risk assets was led by AI-related stocks. Huang explained that this AI correlation is not a direct demand story, but rather a broader channel for risk appetite transmission: silver, as a precious metal with industrial properties, benefits from this.

However, this is precisely the root of silver's vulnerability. When US Treasury yields rise and the dollar strengthens, silver faces pressure from two directions: on the one hand, rising interest rates weaken the attractiveness of non-interest-bearing assets; on the other hand, concerns about the economic outlook directly impact expectations for industrial metal demand. Furthermore, the silver market is much smaller than gold (its investable size is about 1/25th that of gold), resulting in relatively insufficient liquidity. Once funds flow out, the magnitude and speed of price declines will be significantly amplified.

Impact of Indian policies: Local premiums may rise, but near-term demand remains uncertain.

Huang also mentioned that while India's silver import restrictions may tighten domestic supply and drive up local premiums, they have also raised concerns in the market about near-term demand.

On May 16, the Indian government issued an order classifying silver bars with a purity of 99.9% or higher, as well as all other semi-finished forms of silver, into the "restricted" category, requiring prior government approval for import. These two categories of silver accounted for over 90% of India's total silver imports in the previous fiscal year, meaning that virtually all forms of silver imports are now restricted. India relies on imports for over 80% of its silver consumption, with imports reaching a record $12 billion in the previous fiscal year, far exceeding the $4.8 billion of the previous fiscal year; imports in April alone increased by 157% year-on-year to $411 million.

However, from the demand side, this policy has precisely hit a key support level in the silver market. Over the past year, investment demand has surpassed traditional jewelry and silverware consumption to become the main driver of silver demand. With expectations of rupee depreciation, investors are using silver and gold as hedging tools. Import restrictions mean a significant reduction in silver imports for investment purposes, directly impacting a crucial pillar of silver demand. Data shows that inflows into silver ETFs have climbed to record highs, and this demand faces a significant risk of contraction after the new policy is implemented.

Outlook: Fragile tone, focus on geopolitical situation

Huang concluded that the overall tone remains fragile unless US Treasury yields stabilize or oil prices and geopolitical risks cease driving the market to repric a more hawkish interest rate path. More constructive progress on the reopening of the Strait of Hormuz could provide support for silver prices.

Short-term downtrend, price pressured below moving averages.

The current spot silver price is trading around $76. Looking at the daily moving averages: MA20 (77.57), MA50 (76.78), MA100 (81.22), MA200 (64.99). The current price has fallen below the MA20 and MA50, barely holding above the MA200. It's worth noting that the MA100 (81.22) is still significantly higher than the current price, forming a major resistance level. The MA200 (64.99), as a long-term bull/bear dividing line, is currently the last line of support below.

Overall, the short-term moving average system has turned bearish, and the price is hovering in the $76-$77 range. If it cannot quickly recover the MA50 ($76.78) and MA20 ($77.57), the downside risk will increase further.


(Spot silver daily chart, source: EasyForex)

OCBC Bank believes that silver's previous rise relied more on the "indirect transmission" of risk appetite and industrial metals than on demand driven by its own fundamentals. With rising US Treasury yields and a stronger dollar, this supporting logic has quickly crumbled. Coupled with the potential impact of India's tightening of silver imports on near-term demand, silver prices face further downside risks in the short term. Technically, $74.60, $70, and $65 are key support levels; whether the stalemate in the Strait of Hormuz can be broken will be a crucial variable determining whether silver prices can find some breathing room.

At 16:48 Beijing time on May 18, spot silver was trading at $76.12 per ounce.