Silver Charges Toward $70, But Warsh Could Cool Rally

Silver (XAG/USD) accelerates on Thursday and trades around $69.50 at the time of writing, up 2.74% on the day. The white metal is approaching the upper end of the range that has contained price action this week, as investors turn their attention to the Jackson Hole Symposium.

The main catalyst is now the speech from Federal Reserve (Fed) Chair Kevin Warsh, scheduled for Friday. Markets will look for indications about how the US central bank assesses persistent inflationary pressures and what they could mean for the interest rate outlook.

At the July monetary policy meeting, Kevin Warsh did not provide specific guidance on the Fed’s next moves but reaffirmed the central bank’s commitment to bringing inflation back toward its 2% target. A similar message on Friday could reinforce expectations that interest rates will remain elevated for longer, an environment generally unfavorable for Silver, which offers no yield.

Recent US data continue to point to persistent inflationary pressures. The Personal Consumption Expenditures (PCE) Price Index released on Wednesday suggests that inflation remains above the Fed’s target, although recent price indicators do not show a renewed sharp acceleration. According to the CME FedWatch tool, markets currently see around a 62% chance that the Fed will leave interest rates unchanged in September.

Several Fed officials are also maintaining a cautious stance on inflation. Cleveland Fed President Beth Hammack said on Thursday that now is the time to act given persistent inflation and indicated that she does not view current monetary policy as restrictive for the US economy. She also highlighted the risk that households could lose confidence in the Fed’s ability to bring inflation back to 2%.

Meanwhile, Kansas City Fed President Jeff Schmid said the energy shock is starting to feed through to the economy and reiterated the need to return inflation to target. Chicago Fed President Austan Goolsbee, for his part, said that the biggest short-term concern remains that inflation is not fully under control.

These comments could support the US Dollar (USD) and US Treasury yields if investors scale back expectations for monetary easing. A stronger US Dollar and elevated interest rates tend to weigh on Silver by increasing the opportunity cost of holding a non-yielding asset.

However, geopolitical uncertainty in the Middle East continues to provide some support to precious metals. Tensions surrounding the Strait of Hormuz remain elevated despite talks between Iran and Oman, while concerns about energy flows are sustaining both safe-haven demand and inflation risks. Silver therefore remains supported on Thursday, but Warsh’s speech could determine whether the precious metal can extend its advance beyond the $70 area.