Bull and bear markets are terms often heard to describe sustained market moves, but what do they actually mean? And is silver in either of them right now?
Let’s start by defining what the two terms mean. A bull market is so-called because a bull on the attack will drive its horns upwards towards its foe, so the bull is often considered a symbol of a rising market. Or more specifically, a market that has gained by at least 20% from its most recent low.
A bear market is therefore the opposite, a market that has fallen by at least 20% from its most recent high. A bear is attributed to a falling market as an angry ursine will stand on its hind legs and strike downwards with its great paws at an enemy or prey.
As a result, a bullish investor is someone who is optimistic about market conditions and anticipates further gains, while a bearish one is pessimistic and expects markets to decline.
Market Analysis: Bull or Bear Market for Silver?
So now we understand what is meant by bull and bear markets, let’s look at silver’s price performance to see if it qualifies for either term.
Silver has had an underwhelming start to the year with the price largely treading water before falling sharply in February and now recovering some of those losses in March.
As a result, silver is trading lower than it did at the start of the year even though the fundamental outlook in 2023 points to the precious metal continuing its upward momentum from the final quarter of 2022.The recent movements in silver’s price, first downward in February and now up again in March, means the market can neither be defined as a bull nor a bear.
February saw the price fall from just under $24 an ounce to under $20 an ounce, a decline of about 17%. So if the downward trend had continued into March then silver could well have entered a bear market but this month’s gains have seen the precious metal avoid that fate.
Recent Silver Price
Silver’s recent gains have seen the price climb back above $21 an ounce, driven by a weakening of the US dollar and the prospect of the Federal Reserve having to be more accommodative in its approach following the collapse of three US banks in Silvergate, Silicon Valley and Signature.
Silver often struggles at times of rising interest rates as shown by the precious metal’s multi-month slump from April to September last year when the Fed implemented a series of interest rate hikes of 75 basis points. At this point, silver was in a bear market with the price falling from above $26 an ounce to below $18 – or a decline of about 30%.
Silver Price Predictions for 2023
A recent LBMA survey of 30 analysts saw silver set for an average gain of 8.8% to $23.65 an ounce.
One of the main drivers of this positive outlook is the demand for the metal in the energy transition with silver conductive qualities seeing it used in photovoltaics and in the batteries of electric vehicles. Industrial giant Heraeus forecast PV demand for silver to reach a record even with concerns over the health of the global economy.
Other factors affecting the silver market
Recent history shows how tied up silver’s performance is to the actions and words of the Federal Reserve and its officials with the US central bank’s interest rate hikes and hawkish rhetoric outweighing silver’s strong fundamental outlook.
However, the fundamental case isn’t going away with India importing record volumes of silver in 2022. So strong was Asian demand for silver that holdings in London vaults were drawn down to the lowest level since the LBMA began recording the data and this trend has continued into 2023.
Is investing in silver right for you?
Silver’s strong fundamental case hasn’t yet gained the attention it perhaps deserves while investors remain focused on how much higher global interest rates will climb. This raises the argument that the comparatively low levels that silver is trading may represent a buying opportunity.
On the Kinesis platform, investors have the opportunity to purchase fully allocated silver in the form of Kinesis silver, which upon purchase, they become the sole legal title owner of. Kinesis silver is vaulted in a fully insured, audited global network and can be redeemed at any time.
Irrespective of the short to medium-term price outlook, silver can play a role in any investor’s portfolio by offering diversification away from pure equities with the metal often performing well at times of stock market jitters.
Its much lower price compared with its precious metal peer gold means the barriers to entry for an investor are far lower with silver offering many of the same qualities as gold, with the added benefit of its exposure to the key industrial shift of our time, the energy transition away from fossil fuels in favour of renewable options.
Rupert is a Market Analyst for Kinesis Money, responsible for updating the community with insights and analysis on the gold and silver markets. He brings with him a breadth of experience in writing about energy and commodities having worked as an oil markets reporter and then precious metals reporter during the seven years he worked at Bloomberg News.
As well as market analysis, Rupert writes longer-form thought leadership pieces on topics ranging from carbon markets, the growth of renewable energy and the challenges of avoiding greenwash while investing sustainably.
This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.
