Key Takeaways:
Silver rose to a fresh two-month high, extending an August rally of 18 percent, as traders positioned for Federal Reserve Chair Kevin Warsh's keynote address at the Jackson Hole symposium on Friday.
"A dovish surprise at Jackson Hole will be ultra-bullish for gold, as the market will not only continue to price out Fed rate hikes but also refocus on the debasement trade," Citi said in a note.
Spot silver gained 0.4 percent to $69.19 per ounce on Aug 26, according to CNBC data, before pulling back to $68.03 after a hotter-than-expected US inflation reading. Comex silver for September delivery slipped 1.1 percent to $67.96 per ounce on Aug 26. The metal has climbed 18 percent this month, trimming its 2026 decline to under 5 percent. Gold, the primary peer, has gained 14 percent in August to $4,677.19 per ounce, its strongest monthly performance since September 1999, according to UOB.
Warsh's first major speech as Fed chairman on Friday is the next event to watch, with CME FedWatch showing a 40 percent chance of a rate hike at the September meeting, up from 33 percent a week ago. A hawkish tone could halt the precious metals rally, while a dovish surprise would likely extend it.
The rally in silver has been powered by the US Treasury's unexpected intervention in the bond market, which revived the debasement trade — the buying of hard assets as a hedge against ballooning deficits and a weaker dollar. The Treasury doubled buybacks on long-dated bonds after a selloff drove yields to near two-decade highs, according to Reuters. The dollar index has lost 0.8 percent this month, making greenback-priced metals more attractive to holders of foreign currencies.
The Fed's preferred inflation gauge came in warm on Aug 26: headline PCE rose 3.7 percent from a year earlier in July, a tenth above forecasts, while the core measure held at 3.3 percent, in line. Consumer spending barely grew as goods purchases dropped, leaving markets weighing sticky inflation against a cooling consumer. Higher borrowing costs are typically a headwind for non-yielding bullion.
Bullion-backed ETFs added more than 28 tonnes last week, the most since January, in a sign of broadening participation, according to Mining.com.
Silver and gold equities have outperformed the metals this month. Eldorado Gold has gained 55 percent since the end of July, Equinox 53 percent, AngloGold 49 percent, Hecla and Gold Fields 47 percent, Agnico Eagle 47 percent, Coeur 43 percent, Wheaton 43 percent and Newmont 41 percent — multiples of the 14 percent rise in gold and 18 percent advance in silver over the same stretch.
TD Securities analysts Ryan McKay and Bart Melek cautioned that elevated energy prices and persistent inflation risks limit near-term upside: "We caution this rally may be too early for a renewed run back to record highs."
This article is for informational purposes only and does not constitute investment advice.
