Silver extended its retreat from a seven-week high Thursday despite softer U.S. inflation data supporting expectations for easier monetary policy.
This week’s report released by the U.S. Bureau of Labor Statistics stated that consumer prices rose 0.1 per cent in July. Annual inflation eased to 3.4 per cent from 3.5 per cent in June.
Core prices, which exclude volatile food and energy costs, increased 0.2 per cent during the month and 2.5 per cent annually. The relatively mild report reduced some concerns that inflation would force the Federal Reserve to maintain higher interest rates.
However, silver failed to extend its recent rally following the report. Silver has gained almost 13 per cent over the past month, including 12 per cent in little more than a week. However, the metal remains well below the record it reached in January.
Investors now face competing forces that could determine whether the rally continues. Higher oil prices linked to tensions around the Strait of Hormuz could push inflation higher and keep interest rates elevated. Higher rates often hurt silver because the metal pays no interest, making yield-bearing assets more attractive to investors. Conversely, softer U.S. employment data has strengthened expectations for lower interest rates and weakened the dollar.
Industrial demand has also supported silver, particularly through China’s rapidly expanding solar and electricity industries. Manufacturers use silver in photovoltaic cells, which convert sunlight into electricity inside solar panels. Consequently, expanding renewable-energy production has tied silver demand more closely to growth in solar manufacturing.
Read more: NevGold appoints Nevada government affairs veteran Scott Bensing to board
Read more: Strategic U.S. antimony resource emerges in NevGold’s Nevada MRE
Silver miners appear to be advancing faster than silver itself
Precious-metals stocks have shared some of the recent optimism surrounding the metal. Pan American Silver Corp. (TSE: PAAS) (NYSE: PAAS) and First Majestic Silver Corp. (TSE: AG) (NYSE: AG) have posted strong monthly gains. Additionally, investors have positioned themselves for the possibility that silver prices will continue climbing.
Tavi Costa, macro strategist at Crescat Capital, said mining equities have begun outperforming the underlying metal. He cautioned that normal volatility could emerge near resistance levels, although he believes a breakout may only require more time. Furthermore, Crescat has direct exposure to precious metals through investments in several silver-focused explorers and developers.
Its March 31 disclosure included holdings in Silver Bow Mining, Eloro Resources, Alaska Silver and Kuya Silver. Those holdings are reported quarterly on a 45-day delay and can differ across Crescat’s funds and client accounts.
.
