Silver slides 0.8% as war fails to spark traditional crisis rally

Silver futures on COMEX fell 0.8% to $59.795 per ounce on Thursday, extending losses even as Middle East hostilities escalated to their highest level in months.

"The traditional crisis bid is simply not materializing for silver," said Prithviraj Kothari, managing director at RiddiSiddhi Bullions. "Rising oil prices and a stronger dollar are overwhelming what would normally be safe-haven demand."

Brent crude surged above $98 a barrel, the highest since June, after Houthi rebels struck two Saudi Arabian oil tankers in the Red Sea and US forces launched fresh strikes on Iran. Higher energy prices pushed US Treasury yields higher and strengthened the dollar, creating headwinds for precious metals that offer no interest income. COMEX gold also declined 0.85% to $4,116.50 per ounce, retreating from a two-week high set Wednesday.

The divergence marks a structural shift in how silver behaves during geopolitical crises. Kothari identified resistance at $63 per ounce for silver, with the metal now trading nearly 5% below that level. The Federal Reserve's policy meeting next week represents the next major event, with markets pricing better-than-even odds of a September rate cut despite persistent inflation concerns fueled by rising energy costs.

The breakdown of silver's crisis correlation reflects a broader repricing of safe-haven assets as geopolitical risk coincides with inflationary supply shocks. Unlike gold, which retains a central bank demand floor — global central banks have been net buyers at record levels, with prices above $4,000 — silver's dual identity as both a monetary metal and an industrial commodity leaves it exposed to demand-side concerns.

Higher crude prices threaten to slow economic activity, potentially reducing industrial demand for silver in applications ranging from solar panel manufacturing to electronics. The metal has lost roughly 3% over the past two weeks even as the geopolitical risk premium in oil markets expanded by more than $5 a barrel. The iShares Silver Trust (SLV), the largest silver-backed ETF, has seen net outflows of more than 200 tonnes this month, according to exchange data.

LME warehouse data and COMEX inventory reports will be watched closely next week for signs of physical market stress. A sustained break below $58 per ounce could trigger further liquidation, traders said, while a return above $62 would indicate the crisis trade is reasserting itself.

This article is for informational purposes only and does not constitute investment advice.