Silver Staggers Under a Dual Shock as India Lifts Tariffs and UBS Rewrites Supply Math

Silver drops below $78 after India doubles import duties to 15% and UBS cuts global deficit estimate by 80%, while Fed rate hike fears loom.

A bruising Friday session pushed silver below $78 for the first time in weeks, but the true damage came from two directions at once. The metal lost 9.12% to close at $77.55 an ounce, its lowest since early February, as a regulatory bombshell from New Delhi collided with a radical demand revision from one of Europe’s largest banks.

India stunned markets by doubling import duties on silver to 15%, a levy composed of a basic customs duty and an agricultural infrastructure cess. The move completely reverses the tariff cuts introduced in 2024 and comes after Indian silver imports surged 44% last year to exceed $9 billion. With gold purchases also hitting a three-month high in January 2026 and widening the trade deficit, the government moved to ease pressure on the rupee. Industry voices warned the higher costs could revive smuggling channels that had been dormant.

The policy shock hit a market already reeling from a sharp downgrade by UBS. The Swiss bank slashed its estimate of the global supply deficit for this year from 300 million ounces to just 70 million, an 80% cut that strips away the bullish narrative of chronic scarcity. UBS also trimmed its year-end price target to $80 from $85. The driver of the revision is a structural shift in solar manufacturing. Silver paste now accounts for as much as 30% of the cost of a solar cell, prompting producers such as Longi to plan a mass-production switch to copper-based metallization this year.

Macroeconomic headwinds are compounding the bearish turns. US inflation came in at 3.8% in April, stubbornly above expectations, and markets have fully priced out any Federal Reserve rate cuts in 2025. Some traders are now positioning for a possible hike by December. Geopolitical risk from the Iran conflict and the blockade of the Strait of Hormuz adds another layer of uncertainty, stoking cost-push inflation fears.

On the supply side, UBS sees mine production rising this year, while ETF holdings and speculative futures positions are declining, further easing physical market tightness. Yet the metal is still in its sixth consecutive year of structural deficit, and global inventories have been drawn down by hundreds of millions of ounces over that stretch. That underlying tension keeps the analyst community deeply divided.

Citigroup remains bullish, targeting $110 in the second half of the year, citing persistent physical shortages. Goldman Sachs sees fair value between $85 and $100. Even UBS, despite its cut, does not forecast a collapse, arguing that a strong gold price historically supports silver. If the 50-day moving average at roughly $77 holds, the broader uptrend that carried the metal from its January high of nearly $117 remains intact.

New sources of industrial demand could eventually offset the solar slowdown. The build-out of electric vehicles, AI data centers, and defense hardware all require highly conductive components, and a recent US-China tariff truce bolsters that outlook. In the near term, however, silver is fighting a two-front war of policy intervention and a fundamental reassessment, and the $77 support line has become the last line of defense for the bulls.