Silver Set for Third Straight Weekly Gain

Silver traded above $68 an ounce on Friday and was on course for a third consecutive weekly gain, as investors turned to safe-haven metals amid heightened volatility across currency and bond markets, while rising oil prices continued to underscore inflationary risks. The precious metal jumped more than 5% this week after the US Treasury Department announced plans to at least double its long-term debt buybacks in an effort to contain borrowing costs, driving Treasury yields and the dollar sharply lower. Silver also pushed higher even after Treasury yields reversed Wednesday’s decline amid concerns that the government’s efforts to rein in long-term borrowing costs may provide only a temporary solution. Meanwhile, oil prices extended their advance as the US prepares sweeping new economic sanctions against Iran, with the two sides locked in a standoff over the Strait of Hormuz.

Silver prices rose to $68.2 per ounce on Wednesday, the highest in two months, on strong industrial demand and support from a reignition in the debasement trade. The US Treasury announced it would double the buyback of long-term maturities, adding to other efforts that limit the surge in longer ends of the curve. Besides lowering borrowing costs, the signal that the federal government is actively attempting to supress yields lifted the outlook on dollar liquidity, raised risks on higher deficit spending, and turned investors to repivot toward hard assets that defend across a lower purchasing power. 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, in line with an expanding production for solar panels and electricity grids to accommodate for the soaring electrification trend pushed by the central government.

Silver traded near $67 an ounce on Thursday after surging nearly 6% in the previous session, underpinned by a sharp retreat in US Treasury yields as the government moved to rein-in long-term borrowing costs. The US Treasury Department announced it will more than double repurchases of 10-, 20- and 30-year debt in the next few months as the 30-year yield surged to its highest level since 2007 earlier this week. Lower borrowing costs reduce the opportunity cost for markets to hold precious metals, which carry no coupons, making them more attractive to investors. Meanwhile, minutes of the Federal Reserve's July meeting confirmed that some policymakers argued in favor of raising interest rates this year to prevent sharper inflationary pressure later on. Elsewhere, heightened uncertainty in the Middle East as the US and Iran remain at a stalemate kept inflationary risks in focus.