Silver faces downside risk as Warsh's Jackson Hole speech looms

The US merchandise-trade deficit widened in July from $101.40 billion to $118.80 billion, the largest since early last year, as imports surged.

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 is likely to remain volatile, with downside risks building ahead of Federal Reserve Chair Kevin Warsh’s keynote speech at the Jackson Hole symposium. Despite a nearly 25 per cent rebound from its July lows, the metal’s fundamentals remain less supportive, with rising inventories and a subdued LBMA lease rate pointing to limited signs of a physical supply crunch. A hawkish tone from Warsh is expected to weigh on silver, potentially dragging prices towards $67, while $65 remains the next major support.

 

 

Performance: 

On August 21, spot silver, extending its rebound on lower oil prices, subdued yields and a dismal US nonfarm payroll report, rose to $70.02, the highest since June 18. Since then, the metal has entered a consolidation phase as the Dollar Index has stabilised while markets await key data and seek more clarity on the Fed rate path.

At the time of writing this article on the night of August 27, the white metal was trading with a daily gain of 2 per cent at $69.50 as it spiked higher with rallying tech stocks.

 

Data roundup: 

The US merchandise-trade deficit widened in July from $101.40 billion to $118.80 billion (forecast $100.50 billion), the largest since early last year as imports surged on a pickup in inbound shipments of capital equipment. US Imports increased 3.7 per cent, while US exports of goods fell 2.9 per cent. In the week ending August 15, weekly US jobless claims fell from 207K to 203K Vs the estimate of 208K, while continuing claims fell to 1778K from 1796K in the week ending August 22. 

US PCE Price Index rose 0.2 per cent m-o-m in July Vs the estimate of 0.1 per cent and prior data of -0.1 per cent m-o-m, while PCE Price Index was up 3.7 per cent y-o-y as against the forecast of 3.6 per cent and prior data of 3.7 per cent y-o-y. The second estimate of US Q2 GDP matched the forecast of annualised growth of 1.5 per cent. Q2 personal consumption was revised higher from 3.2 per cent to 3.4 per cent (prior 3.2 per cent). Q2 GDP Price Index came in at 6.4 per cent Vs the forecast of 6.2 per cent as core PCE price Index at 3.6 per cent was hotter than the expected reading of 3.4 per cent. July real personal spending stagnated following an increase of 0.4 per cent in June. 

 

Warsh’s speech at Jackson Hole Symposium: 

At 7:30 PM IST on August 27, Fed Chair Kevin Warsh will deliver his keynote address at the annual Jackson Hole Economic Policy Symposium, whose 2026 theme is “Financial Innovation: Implications for Payments and Policy.” While the theme itself may not appear particularly market-moving, Jackson Hole has historically served as a platform for Federal Reserve Chairs to signal important shifts in policy thinking, with market repercussions often lasting for months. This year, however, the backdrop is more challenging.  

Consistent with his policy framework, Warsh has largely refrained from providing forward guidance, a stance that has contributed to uncertainty and kept long-term U.S. Treasury yields elevated. His remarks following the July 29 FOMC meeting also weakened his hawkish credentials, as he neither joined the dissenters advocating a rate hike nor clearly articulated how the Fed intends to return inflation to its target. As a result, Warsh faces a delicate balancing act at Jackson Hole: reassuring markets that the Federal Reserve remains committed to restoring price stability while preventing a further rise in long-term yields driven by policy uncertainty.

 

ETF and inventory: 

Total known global silver ETF holdings stand at 801 Moz, highest since March 27, as investors added 374 tons of silver to their ETF holdings in August on reduced Fed rate hike possibility. Holdings are up 2.56 per cent from the cycle low of 781 MOz reached on July 14. However, holdings are still down 7 per cent TYD as investors reduced their positions in the wake of the Iran war. Net decline in holdings since the start of the Iran war stands at 965 tons presently. 

Registered COMEX silver inventory at 99.19 Moz is up 25 per cent from the cycle low of 75.71 Moz recorded in April 28; however, inventory is down 50 per cent from the record peak of 201 Moz seen in September last year.

Shanghai Silver on-warrant stocks daily total has surged to 1416 tons, a rise of 461 per cent from the cycle low of 252 tons hit on March 11.

 

LBMA one-month lease rate: 

One-month LBMA lease rate remains uninspiring at 0 per cent as it does not reflect any immediate supply crunch.

 

Outlook: 

Silver is likely to be highly volatile as intrinsic fundamentals are not so appealing now. Surge in inventories and extremely subdued LBMA lease rate do not reflect a tight market. 

The white metal has rallied nearly 25 per cent from the cycle low of $54.77 level hit on July 17.The Fed Chair Warsh's speech will be crucial for the metal. A convincing hawkish stance, which is highly likely, would weigh heavily on the metal and can take it down to $67. Next major support is around $65. Resistance is at $70.60/$72.10. At the same time, a dovish or unconvincing speech may help the metal to rise to $72. Odds are tilted in favour of a downside move, though.