Silver prices fell sharply on Tuesday, taking a lead from gold, which dropped to a two-month low as US inflation figures came in higher than expected.
Silver prices had one of their largest single-day sell-offs in months, dropping as low as $22.03 an ounce in the afternoon session, compared with above $22.90 an ounce in the morning.
The grey metal was caught up in a larger downturn in the precious metals markets on Tuesday after the release of figures showing that US inflation fell to 3.1% in January from 3.4% in December, but well above expectations of 2.9%. The higher-than-expected inflation reading makes it more likely that the US Fed will keep interest rates on hold for longer – a bearish factor for precious metals, which don’t carry a yield.
Silver’s sharp price drop is likely to focus minds on the longer-term charts, given the metal has tested the $22.00 an ounce level in recent months, notably in November 2023 and again in January. On a technical basis, a break below this level could leave the market open to further downside, while a rebound would help solidify $22.00 as a support base.
Looking ahead, Wednesday will see the release of Euro Area industrial production figures for December. Unlike gold, approximately half of global demand for silver comes from the industrial sector, highlighting the metal’s dual role as an industrial as well as a precious metal.
The markets will be watching out for monthly US producer prices for December due out on Wednesday, followed by US monthly retail sales figures on Thursday, both of which will feed into the broader picture of upcoming monetary policy decisions by the US Fed.
Frank’s experience covering the commodities markets spans 22 years, with a particular specialism in metals, carbon and energy markets. He has worked as a senior editor for S&P Global Commodity Insights (formerly Platts) and before this, at ICIS-LOR, a part of Reed Business Information (Reed Elsevier), where he covered the petrochemicals markets from 2003 to 2005.
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