Silver Extends Gains on Inflation Data

SILVER

Silver futures are higher, extending gains from yesterday as Tuesday’s inflation data reinforced expectations of a Fed rate cut in September. Silver prices remain supported by a persistent structural supply deficit and strong investor interest. Industrial demand, especially from energy sectors like solar power, EVs, and electronics, continues to grow, with solar alone making up 17% of total demand last year, triple its share a decade ago.

Global mine supply has dropped 7% since 2016, contributing to an estimated 800 million oz. shortfall from 2021 to 2025. Investor demand through silver-backed ETPs also plays a major role, with 95 million oz. in net inflows in H1 2025 and over 1.1 billion oz. drawn from mobile inventory since 2019. Despite recent tariff-related headwinds, silver’s long-term outlook remains strong due to its critical role in clean energy technologies, as evidenced by rising solar capacity in China and Europe and resilient semiconductor demand.

COPPER

Copper futures are lower as data out of China showed that new yuan loans dropped unexpectedly in July, sending yet another sign of weak demand in the economy despite Beijing’s efforts to bolster domestic demand. A measure of new yuan loans shrank by 50 billion yuan last month, according to official data released Wednesday by the People’s Bank of China, suggesting that borrowers rushed to repay funds. It marked the first such decline in about 20 years. Chinese authorities, including the finance ministry this week said they will provide subsidies to businesses in some service sectors and consumers who take out loans in an effort to boost borrowing demand.

The rapid expansion of artificial intelligence (AI) data centers is expected to significantly tighten the global copper market, potentially leading to a supply shortfall of 6 million tons by 2035, according to a new report from BloombergNEF (BNEF). Analysts project that copper demand from AI data centers will average around 400,000 tons annually over the next decade, peaking at 572,000 tons in 2028. By 2035, cumulative copper usage by data centers could exceed 4.3 million tons, adding to the already surging demand from sectors like power transmission and wind energy, where copper consumption is anticipated to nearly double. Copper plays a critical role in data center infrastructure, accounting for up to 6% of capital expenditure due to its superior electrical and thermal conductivity, as well as its ductility and malleability, which make it ideal for compact components like connectors. Meanwhile, North American data center infrastructure is projected to grow dramatically, from a $33 billion industry in 2020 to $70 billion by 2030 and $185 billion by 2040.

On the supply side, Chile allowed mining to resume at Codelco’s El Teniente mine, easing shortage fears after a mine collapse caused a halt in operations. Weighing on copper prices are rising stocks in LME-approved warehouses, which at 155,000 metric tons are up more than 70% since late June, while CME warehouse stocks stand abundant at 265,000 tons.

Traders are closely watching the large copper shipments that arrived in the US ahead of broad tariffs. Price spreads between London, New York, and Shanghai will guide metal flows, with US copper futures currently trading about $130/ton above LME prices, narrowing the incentive for exports. Any deviation beyond a $100–$200 spread between CME and LME is likely to trigger shifts in copper movement.

GOLD

Gold futures are higher as expectations of a Fed rate cut in September continued to grip markets following the July CPI inflation report. Annual inflation held at 2.7% in July, below forecasts of 2.8%, while core inflation accelerated more than expected to 3.1%.

The modest cooling in headline inflation is encouraging, but core inflation remains sticky, especially in services. The underlying inflation trend with core prices will keep the Fed cautious, increasing the stakes of the August labor report. The Fed is likely to interpret this as progress but not victory. With core services inflation still elevated, the central bank may maintain its restrictive policy stance, reinforcing the higher-for-longer narrative, dependent on labor market conditions.

Investors will closely monitor key US economic data releases later this week, including PPI inflation and retail sales data, for more clues on the Fed’s rate path. On the trade front, President Trump signed an executive order extending the tariff truce between the US and China for another 90 days, pushing trade negotiations out to the fall. China also announced the extension of the tariff pause on state media.

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