Silver price outlook: Spot silver slumped on Wednesday on a stronger US Dollar as rate hike concerns mount. The metal, at the time of writing this article on the night of July 16, was changing hands at $55.84 -- down 3.37 per cent for the day.
Earlier, in the week ending July 10, the white metal slumped 4.08 per cent to close at $59.86.
Geopolitics and oil
US President
Donald Trump has told Congress that the ceasefire is over, and the US has returned to the war.
Reacting to Trump’s warnings to blow Iran’s bridges and powerhouses, IRGC threatened to strike the regional infrastructure.
On Thursday, Iran asked its Houthi allies in Yemen, which are yet to join this war, to close the Red Sea oil route if the US strikes Iran’s power network.
Traffic in the Strait of Hormuz has slowed down drastically, pushing the seven-day moving average of crude oil flows, including Iranian supplies, through Wednesday down to about 5.5 million barrels a day, from around 9.4 million barrels a day the previous week, according to Bloomberg calculations based on vessel-tracking data and information from Kpler and Vortexa data.
Data roundup:
The US retail sales, matching the estimate, rose 0.2 per cent M-o-M in June (prior upwardly revised 1 per cent); retail sales control group was noted at 0.5 per cent (forecast 0.5 per cent, prior upwardly revised 0.8 per cent). Philadelphia Fed Business Outlook surprised to the upside as the Index surged from 12.5 in June to 41.40 in July -- nearly a five-year high. Weekly job data were positive, but the NAHB housing Index and pending home sales disappointed.
Earlier, the US PPI data fell short on all four counts as headline June PPI came in at 5.5 per cent vs the forecast of 6.2 per cent, while the prior data was revised lower from 6.5 per cent to 6 per cent.
US CPI inflation declined in June for the first time in six years as the Index fell 0.4 per cent M-o-M from May. The sharp decline in inflation came on the biggest decline in gasoline prices since 2022; CPI inflation was up 3.5 per cent Y-o-Y versus the forecast of 3.8 per cent and prior 4.2 per cent in May.
The Fed Chair’s testimony:
The US Federal Reserve Chair Warsh, in his first testimony to the US House Financial Services Committee and Senate Banking Committee on July 14 and July 15, respectively, reiterated that price stability is the prime objective of the Central Bank. He dismissed the softer-than-expected June readings as just one data point. He noted that inflation has been above the 2 per cent target of the Federal Reserve for the past sixty-three months.
He sees AI as inflationary first before it eventually becomes disinflationary.
Warsh reiterated that the balance sheet should be “as small as practicable,” with interest rates serving as the primary policy instrument.
The Fed Chair stressed upholding the Fed’s independence and said that there was no political pressure from the President, which again is bearish for the metal for the time being.
Fed Governor Waller, citing elevated core CPI, said on Tuesday that the central bank needs to hike rates as inflation remains elevated.
The New York Fed President John Williams said on Wednesday that while inflation remains elevated, he believes that it has peaked and should meet the Bank’s target by 2028. He added that current rates are well-positioned.
Dollar Index and yields:
The US Dollar Index, buoyed by Warsh's hawkish testimony and Middle East worries, gained on Thursday. At the time of writing this article, the Index was hovering around 100.75, up 0.25 per cent for the day.
Two-year US yields at 4.17 per cent were up 3 bps, so were the ten-year yields at 4.58 per cent. Following softer-than-expected US CPI and PPI reports for June, two-year and ten-year yields have slid 11 bps and 6 bps, respectively, while the Dollar Index is nearly 1 per cent lower than the cycle high of 101.80 reached on June 24.
Fed rate hike probability:
Probability of the Fed hiking rates in December stands at 75 per cent.
Implied Overnight rates suggest the Federal Reserve will hike rates 1.15 times at the year-end, while another 0.60 hike can come in April 2027.
Silver being replaced with copper:
Driven by volatile silver prices, high-efficiency solar panel makers are pushing to replace silver paste with copper-based alloys, though copper itself is facing supply issues. The replacement could ease silver demand by 2-3 per cent this year, though we note that rise in demand from AI/data centres could dampen the net impact.
ETF and COMEX inventory:
As of July 15, total known global silver ETF holdings stood at 784.06 MOz, as the ETFs recorded a huge net inflow of over 4 MOz on July 15; however, ETFs have seen a net outflow of 76 MOz (9.04 per cent) Y-T-D. Investors have effectively dumped 48 Moz (5.76 per cent) since the beginning of the Iran war on February 28.
Registered COMEX silver inventory stands at 95.53 MOz, highest since August 2025; however, the inventory is sharply down from 201 MOz record high observed in September 2025.
Silver Lease rate:
One-month LBMA lease rate at -0.17 per cent does not betray any immediate supply concerns.
Upcoming data:
Major US data on deck in the near term include import and export price indices, housing starts. Industrial production and University of Michigan Sentiment and inflation expectations - all slated to be released on July 17, weekly ADP data (July 21) and S&P Global US PMIs (July 24).
Traders will also monitor Eurozone's CPI (July 17), the ECB's monetary policy decision (July 23), Eurozone's S&P PMIs (July 24) and the UK's monthly job report (July 21), CPI (July 22) and PMIs (July 24).
Japan will release its national CPI data on July 24.
Silver outlook:
Hawkish Fed commentary and escalation in the US-Iran conflict will keep the metal under pressure in the short term.
The white metal is quite oversold but can extend its decline to test the key support at $54. Resistance is seen at $58/$60.
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Disclaimer: This article is written by Praveen Singh, head of commodities at Mirae Asset Sharekhan. Views expressed are his own. Readers' discretion is advised.
 "Silver outlook: Hawkish Fed, West Asia tensions weigh; may test $54")
