Silver Extends Gains on Precious Metals Rally

Silver climbed to around $66 an ounce on Tuesday, hitting a seven-week high and tracking a rally in gold fueled by improving investment demand for precious metals despite rising inflationary risks and expectations for interest rate hikes amid surging oil prices. The white metal also continued to benefit from robust industrial demand tied to expanding production of solar panels and electricity grids. Recent data showed Chinese imports of silver-bearing ores surged 62.5% annually in June to 219,000 tonnes. Meanwhile, uncertainty persisted over a potential deal between the US and Iran to end the war and reopen the Strait of Hormuz, keeping markets wary of inflation and the outlook for interest rates. Investors also awaited a key US inflation reading this week for fresh clues on the Federal Reserve’s policy outlook.

Silver prices were above $63.5 per ounce on Monday, the highest in seven weeks, amid the view that the Federal Reserve is less likely to raise interest rates this year. Nonfarm payrolls unexpectedly dropped in July as the labor force declined. Lesser bets of a rate hike were also supported by oil prices remaining well below their Iran war peaks this year, easing energy inflation. Expectations that financial conditions will not tighten significantly benefited precious metals by decreasing the opportunity cost of holding non-yielding assets. In turn, industrial demand for silver also supported bids. Chinese imports of silver-bearing ores surged 62.5% annually in June to 219,000 tonnes. The data was in line with an expanding production for solar panels and electricity grids. Still, lingering risks of a flare-up in energy prices maintained silver relatively close to the seven-month low of $55 per ounce from July 16th.

Silver traded near $64 an ounce on Monday after surging more than 10% last week, supported by an unexpected contraction in the US labor market that led traders to reduce expectations for a near-term Federal Reserve interest rate hike. Data released Friday showed the US economy unexpectedly lost 23K jobs in July, following a downwardly revised 20K increase in June and falling well short of forecasts for an 80K gain. Markets now price around a 44% chance of a 25 basis point rate hike in September, down from 67% a week earlier. Silver also held its gains even after oil prices climbed higher as uncertainty persisted over efforts to reopen the Strait of Hormuz. Iran said talks with Oman were close to an agreement but denied holding direct negotiations with the US, despite Washington’s claims that a deal was imminent.