Silver Surges Amid Oil Price Plunge and Receding Inflation Fears

Oil prices plummeted on Tuesday, causing inflation expectations to tumble and sparking a rally in precious metals. The U.S.-Qatari talks over a mechanism to improve traffic through the Strait of Hormuz showed progress, leading traders to aggressively unwind bets on a near-term supply shock.

West Texas Intermediate crude for delivery on the New York Mercantile Exchange dropped 5.7% to settle at $75.77 a barrel, while Brent crude fell 5.3% to $79.36. The collapse in energy costs eased marginal inflation pressures, lifting government bonds and driving the yield on the benchmark 10-year Treasury note down to around 4.6%, with the two-year yield near 4.20%.

The receding inflation fears immediately diluted the urgency for further Federal Reserve tightening. Chair Kevin Warsh signaled that the central bank was content to let financial markets price the degree of restraint, offering no detailed rate path. The ISM manufacturing index climbed to 55.6 in July from 53.3 in June, keeping the growth-and-inflation trade alive.

Silver prices surged 2.39% to $59.45 an ounce, closing in on the psychologically important $60 threshold, while spot gold added 0.57% to $4,077.70. The metal's unique industrial role, particularly as a key component in photovoltaic cells, provided extra resilience.