Silver Extends Downturn

Silver dropped 6% to $79 an ounce on Friday, extending losses for a second consecutive session, as concerns over rising US inflation and potential rate hikes weighed on the market. Recent data revealed that US producer, import, and export prices rose at their fastest pace since 2022 in April, while annual inflation reached its highest level since 2023, due to the prolonged Iran war and the ongoing closure of the Strait of Hormuz. Markets have now fully priced out the chance of a Federal Reserve rate cut this year, with some traders even wagering on a potential hike by December. Adding to the pressure, UBS strategists slashed their full-year investment demand from over 400 million ounces to 300 million ounces, amid weaker industrial usage, and increased mine supply. The bank also expects the silver market’s supply deficit to shrink dramatically to around 60–70 million ounces, down from a previous estimate of 300 million ounces.

Silver dropped more than 6% below $79 an ounce on Friday, marking a second consecutive session of declines as weakness across the broader metals complex intensified amid rising concerns over US inflation and potential rate hikes. Data released earlier this week showed US wholesale inflation accelerated at its fastest pace since 2022 in April, while consumer prices recorded their sharpest increase since 2023. Inflation pressures have been fueled largely by the prolonged Iran war and the ongoing closure of the Strait of Hormuz, which has significantly disrupted global energy flows. Markets have now fully priced out the possibility of a Fed rate cut this year, while some are betting on a potential rate hike by December. Despite the recent selloff, silver remains supported by stronger industrial demand expectations tied to electronics, solar panels, and other applications that rely on the metal’s high electrical conductivity.

Silver fell to $85.6 an ounce Thursday as investors focused on the meeting between US President Donald Trump and Chinese President Xi Jinping. Trump stated that Xi had agreed to assist with Iran "with whatever" he needs, while Xi noted progress in trade talks but warned that disputes over Taiwan could strain relations and even risk conflict. Investors also digested US data showing both import and export prices surged more than expected last month, driven by rising fuel import costs and nonagricultural export prices. Following earlier hot consumer and producer price data, markets have priced out US interest rate cuts for this year, with a near 30% chance of a hike by December. Despite India raising import tariffs on gold and silver to 15% from 6%, industrial demand prospects for silver, used in electronics, solar panels, and other applications due to its high electrical conductivity, remain supportive. The metal also continues to serve as a traditional investment asset alongside gold.