During the Asian trading session on Tuesday, July 21, the spot price of silver experienced a significant surge, climbing over 3% to reach a four-day high of $58.67 per ounce. The core logic that had been persistently weighing on silver prices—rising oil prices fueling inflation fears and interest rate hike expectations—has shown marginal signs of easing, providing room for a silver price rebound.
The price of WTI crude oil retreated after hitting a monthly high of $84.60 on Monday, currently trading around $82, down approximately 0.45% on the day. The immediate catalyst for the oil price pullback was a shift in geopolitical news—Iran confirmed receiving a 10-day ceasefire proposal from mediators.
Key Catalysts: 10-Day Ceasefire Proposal Triggers Marginal Easing of Geopolitical Risk Premium
The primary driver for the silver rebound stems from changes in the geopolitical landscape. Iran confirmed that mediators have submitted a 10-day ceasefire proposal to Tehran, aimed at finding a path to revive the interim agreement reached last month. This news has rekindled market hopes for renewed US-Iran diplomatic talks, marginally easing concerns over energy supply.
Previously, escalating US-Iran military conflict had driven oil prices higher, stoking market fears of "unanchored" global inflation expectations and subsequently reinforcing expectations for major central banks to raise interest rates. This chain of logic had been continuously suppressing the performance of non-yielding assets like silver.
The recent oil price pullback has loosened this logic, with short covering driving the silver price rebound.
Monetary Policy Context: Fed Likely to Hold Steady Next Week
On the monetary policy front, the latest data from the CME FedWatch Tool shows the market widely expects the Federal Reserve to keep interest rates unchanged at its policy meeting next week. This expectation is already largely priced in, and traders have adjusted their probabilities for a September rate cut accordingly.
However, analysts caution that in the current environment of high oil prices, energy shocks continue to support inflation expectations. The high volatility in crude oil prices resulting from US-Iran conflict is keeping the Fed more focused on upside inflation risks rather than modest improvements in the labor market. The pass-through effect of energy costs into core inflation could prolong the duration of elevated inflation.
As long as energy prices remain elevated, the Fed will find it difficult to signal a clear easing stance in the near term—a fundamental constraint that has not fundamentally changed due to the recent ceasefire proposal. Fed officials would need to observe whether oil prices show a substantive decline and whether inflation data resumes a downward trend before considering any adjustments to the policy path.
Against this backdrop, market expectations for the Fed's future actions are turning more cautious. Overall, energy factors are becoming a key variable constraining the pace of monetary policy easing, and global asset pricing will continue to be influenced by them.
Institutional Perspectives
ING stated that silver is expected to moderately outperform gold, with core support coming from persistent market deficits and the broad electrification trend. The global silver supply-demand deficit is projected to continue through 2026. While industrial consumption has seen a slight dip due to high prices (with silver thrifting in areas like photovoltaics), demand resilience remains strong in sectors like AI, automotive electronics, and new energy.
ING believes the energy transition forms the foundation for a long-term silver bull market, with short-term volatility primarily influenced by macro-financial conditions. If Fed policy easing exceeds expectations or geopolitical risks intensify, silver still has room for a rapid rebound.
Macquarie Bank noted that high inflation and rising bond yields are creating downward pressure on precious metals. Silver, having previously outperformed gold, is more susceptible to rapid pullbacks. Historical data shows its volatility is significantly higher than gold's.
Macquarie pointed out that although supply-demand fundamentals remain tight (with consecutive years of deficits), factors like a stronger US dollar, profit-taking, and industrial silver thrifting trends may dominate short-term price action.
The institution advises maintaining caution, focusing on tracking Fed policy signals and global economic growth data. In a high-volatility environment, diversified allocation and buying on dips are more appropriate strategies.
The bank maintains that silver's long-term potential remains, but cautions about pullback risks into 2026, awaiting clearer catalysts for easing to emerge.
Technical Analysis
On the daily chart, spot silver is currently trading below its 50-day, 100-day, and 200-day moving averages, close to the 20-day MA. The overall medium-term trend is within a downward channel, with the current move representing a weak, low-level rebound following a decline.
On the indicator front, the MACD is below the zero line, with the DIFF at -2.611 rising towards the DEA at -2.870, forming a low-level golden cross and showing faint red bars, indicating some exhaustion in bearish downward momentum. The RSI reading of 42.91 is slightly below the midline, not yet in oversold territory. The short-term rebound momentum appears weak, with no strong reversal signals present.
Summary
Silver surged over 3% on Tuesday to around $58.60, catalyzed by a temporary pause in oil's rally. Iran's confirmation of receiving a 10-day ceasefire proposal rekindled hopes for US-Iran diplomatic de-escalation, marginally easing energy supply concerns and triggering short covering in silver. The core logical chain that had been persistently suppressing silver prices (rising oil → inflation fears → rate hike expectations → silver pressure) has shown signs of loosening.
While the market widely expects the Fed to hold rates steady next week, the support for inflation expectations from the high oil price environment persists. The sustainability of silver's rebound remains to be seen.
As of 14:39 Beijing time on July 21, spot silver was trading at $58.56 per ounce.
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