Silver price slips as investors bank gains ahead of US CPI
The metal prices retreated from a seven-week high as traders lock in gains before US inflation data comes out.
Silver prices fell on Tuesday as investors cashed in profits before a crucial US inflation report, scaling back a rally that had pushed the metal up around 12% in just a week. The precious metal traded close to $65 per ounce after peaking just above $66 intraday, marking a volatile surge that has seen silver rise almost 13% over the past month. However, it still lags far behind its January record high.
Investors are grappling with two contrasting forces. Elevated oil prices due to tensions in the Strait of Hormuz could reignite inflation and keep interest rates on an upward trajectory, which is generally unfavorable to non-income-generating metals. On the other hand, weaker US employment data has fueled hopes for a more accommodative monetary policy, putting downward pressure on the dollar.
The imminent test for silver will arrive on Wednesday when the US Bureau of Labor Statistics unveils July consumer-price data at 8:30 a.m. ET. June prices fell by 0.4% from the previous month, while annual inflation was recorded at 3.5%. A more robust than anticipated July reading could weigh on silver, whereas softer inflation could strengthen expectations for lower rates.
The industrial demand for silver has also provided some support to its rally, especially from China's solar and electricity sectors. Silver plays a crucial role in photovoltaic cells, increasingly tying its price to the growth in renewable-energy manufacturing. Precious-metals equities have mirrored some of this optimism. Pan American Silver and First Majestic Silver have both seen strong gains over the past month as investors bet on further strength in the metal.
Macro strategist Tavi Costa from Crescat Capital pointed out that "Silver miners appear to be moving ahead of silver itself." While cautioning about potential volatility near resistance levels, Costa believes that a breakout could be imminent. Crescat's March 31 portfolio disclosure revealed stakes in various silver-focused explorers and developers, including Silver Bow Mining, Eloro Resources, Alaska Silver, and Kuya Silver.
The firm emphasizes that its published holdings are updated quarterly on a 45-day delay, which may vary across its funds and client accounts.
The broader precious-metals market has remained resilient. US silver futures climbed 2.8% on Monday, ending at $65.106 an ounce, their second consecutive increase. Meanwhile, gold futures closed at $4,361.80. Despite silver being more than 40% away from its January peak, it is roughly three-quarters above its 52-week low. A dip back below $60 would significantly erode silver's latest gains, while a sustained move past the recent highs could reinforce momentum following the sharp August rally. Wednesday's inflation report will likely determine which side comes out on top.
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