On Wednesday during the European session, spot silver traded higher, climbing nearly 2% to around $66 per ounce, maintaining strength ahead of the US CPI data release later today.
Market expectations point to the July headline CPI annual rate slowing from 3.5% to 3.4%, with core CPI decreasing from 2.6% to 2.5%. However, traffic through the Strait of Hormuz has plummeted to just six vessels, compared to the pre-war normal of 130-140 ships daily, persistently pushing oil prices higher and potentially capping silver's upside.
Inflation Data Becomes Key Near-Term Variable
Market focus has fully shifted to tonight's US July Consumer Price Index (CPI) data. According to consensus estimates, the headline CPI annual rate is expected to edge down from 3.5% in June to 3.4%, while the core CPI annual rate is forecast to drop further from 2.6% to 2.5%. On a month-over-month basis, headline CPI is projected to rise 0.1%, and core CPI by 0.2%.
Investors are closely watching this inflation report for fresh clues on the Federal Reserve's monetary policy outlook. In the July policy statement, Fed Chair Powell explicitly warned of upside inflation risks and reiterated the committee's commitment to bringing inflation down to the 2% long-term target. If tonight's data comes in hot, especially if core inflation exceeds expectations, it could reignite expectations for a rate hike in September or by year-end, pushing US Treasury yields and the dollar higher, thereby exerting significant pressure on the zero-yield precious metal silver. Conversely, if the data meets or falls short of expectations, it would further cement the Fed's wait-and-see stance, lowering the opportunity cost of holding silver and providing support.
As an interest rate-sensitive precious metal, silver's short-term trajectory will heavily depend on the inflation outcome and the immediate adjustment of policy expectations.
Strait of Hormuz Traffic Plummets, Oil Prices Continue to Strengthen
A key limiting factor for silver's upside comes from the energy market. Current traffic through the Strait of Hormuz has plunged to just six vessels, far below the recent 10-day average of about 11 ships and a mere fraction of the pre-war normal of 130-140 vessels per day. As a critical waterway for nearly 20% of global energy supplies, the sharp decline in traffic continues to lift crude oil prices and heighten concerns about a resurgence in inflation.
Rising oil prices impact silver through two main channels: First, higher energy costs directly boost overall inflation expectations, strengthening the case for major central banks to raise rates or maintain high rates, thereby increasing the opportunity cost of holding the zero-yield asset silver. Second, in a high-inflation environment, the trajectory of real rates becomes more complex, potentially undermining silver's appeal as a safe-haven asset. If the Strait of Hormuz standoff persists for an extended period, elevated oil prices will continue to suppress silver's upside elasticity, making it difficult for the metal to stage an independent strong rally.
Markets are closely monitoring the situation for any signs of restored passage through the strait to assess the transmission strength of the energy shock to the precious metals market.
CME Launches 24-Hour Silver Trading
On Tuesday, the CME Group officially announced that starting in September, it will allow its 100-ounce silver futures contract to trade 24 hours a day. This decision follows the July 24 launch of the 1-ounce micro gold futures contract, which has garnered strong market reception since its introduction, with trading volumes and participation exceeding expectations.
The CME's move aims to further enhance the flexibility and global accessibility of the precious metals futures market, particularly providing a more continuous trading window for investors in Asian and European time zones. Around-the-clock trading will significantly boost liquidity in the silver market, reducing the risk of price gaps and liquidity disruptions caused by trading hour restrictions, enabling both institutional and retail investors to respond more promptly to global macroeconomic data, geopolitical events, and shifts in industrial demand.
Silver, possessing both precious and industrial metal attributes, often sees its price volatility closely linked to the electronics, photovoltaic, and new energy industry chains. The introduction of 24-hour trading is expected to attract more cross-time zone capital, enhance price discovery efficiency, and potentially have a positive impact on silver's long-term market structure—including tighter futures-cash linkages, a smoother volatility curve, and higher international market attention. Analysts believe that this move, combined with the successful experience of the micro gold contract, will further solidify the CME's leading position in the global precious metals derivatives market and lay the foundation for the diversified development of silver investment instruments.
Institutional Perspectives
UBS's latest forecast suggests that silver prices are likely to recover gradually, reaching $65 by September 2026, rising to $70 by the end of that year, and climbing further to $75 by June 2027. Although silver faces significant near-term pressure, the bank believes the current weakness is a temporary adjustment rather than the start of a structural decline. The supporting logic is that the physical market remains in a supply deficit, long-term demand from electrification and industry remains resilient, and the eventual shift in Fed rate expectations could lower holding costs. UBS emphasizes that the price path will be a gradual recovery rather than a rapid return to this year's highs. Investors should focus on the impact of inflation data and dollar trends on real rates; if the macro environment improves, silver could achieve relative performance amid a broader precious metals recovery. The bank maintains a constructive view on the medium-term outlook, believing the $75 medium-term target is fundamentally supported.
JPMorgan has adjusted its second-half average target to a range of $60 to $65 per ounce, significantly lower than its previous full-year forecast of around $81 and its Q4 peak outlook of $85. The bank argues that the silver market is normalizing from last year's extremely tight physical supply environment, with the gold-to-silver ratio also undergoing normalization. Industrial demand is facing headwinds, particularly the "silver reduction" technology and substitution trends in the photovoltaic sector, which have weakened long-term demand growth expectations. At the same time, uncertainty surrounding the Fed's policy path, persistently high real rates, and volatile investment demand are further suppressing price upside. JPMorgan notes that while a structural supply deficit remains, short-term macro headwinds and slowing demand make it difficult for silver to quickly return to highs. If the Fed's stance in September leans hawkish, prices could even test lower support levels.
Summary
Spot silver is maintaining strength ahead of tonight's US CPI data release. Markets expect a moderate easing of inflation, though Fed Chair Powell has previously warned of upside inflation risks and reiterated the 2% target commitment. However, traffic through the Strait of Hormuz has plummeted to just six vessels (pre-war level of 130-140), persistently pushing oil prices higher and potentially capping silver's upside. The CME has announced plans to launch 24-hour silver trading, which could enhance market liquidity. In the short term, silver's trajectory depends on how the CPI data influences the market's repricing of the Fed's policy path—if inflation is moderate, silver prices could extend gains; if inflation overshoots, rate hike expectations could reignite, leading to potential downside pressure on silver. The actual navigational status of the Strait of Hormuz and geopolitical developments will continue to provide a floor of safe-haven demand for silver.
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