Silver Tumbles as Industrial Demand Wanes Amidst Macro Volatility
The market's attention is focused on American data this week, but there's something that might be flying under the radar: the positioning gap between Gold and Silver.
Financial markets are moving on fears related to persistently high energy prices driven by the Middle East war. The US Dollar (USD) is strong, but at what cost? While the United States economy keeps growing at a solid pace, the country's debt is mounting to record levels.
Persistent inflation concerns have taken their toll on precious metals. Spot Gold lost roughly 3.3% on Monday and Silver shed nearly 5%. The Gold/Silver ratio stands at 68.4, which means Silver could recover faster than Gold if a recovery actually happens.
The Commitment of Traders (COT) report suggests that fund positioning moving away from Silver amid macroeconomic volatility is partially responsible for the divergence. Decreased industrial demand may also be contributing to Silver's underperformance: solar manufacturers are reducing the amount of Silver required in each cell through narrower metallization lines.
The upcoming inflation and employment figures will likely have a significant impact on the market. The Personal Consumption Expenditures (PCE) Price Index is forecasted at 3.4% YoY in August, nearly doubling the central bank's 2% goal. A higher-than-anticipated outcome should boost USD demand to the detriment of precious metals.