Silver Pulls Back as Investors Take Profits

Silver slipped toward $64 an ounce on Tuesday, erasing earlier gains as investors took profits following a strong rally and assessed the potential impact of surging oil prices on inflation and the interest rate outlook. Earlier in the session, the metal climbed to a seven-week high, tracking gains in gold as investment demand for precious metals improved. Silver also remained supported by solid industrial consumption, particularly from expanding solar panel manufacturing and electricity grid development. Recent data showed Chinese imports of silver-bearing ores jumped 62.5% year-on-year in June to 219,000 tonnes. Meanwhile, uncertainty remained over a potential US-Iran agreement to end the war and reopen the Strait of Hormuz, keeping markets cautious about inflation and interest rates. Investors also awaited key US inflation data this week for fresh signals on the Federal Reserve’s policy outlook.

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.