Silver has perked back above $23 an ounce after Chinese data that exceeded expectations has given markets a lift and reduced concerns about the health of the world’s second-largest economy.
While silver is pointing upward again it is still trading a long way below the high of the year touched in May above $26 an ounce. This near $3 gap between silver’s current level and its high of just a few months ago illustrates how far the precious metal has fallen from favour as well as the potential gains available given that the macroeconomic environment isn’t markedly different now from the conditions in early May.
Silver’s greater industrial exposure than its precious metal peer, gold, means that the state of the global economy has a greater impact on the metal’s price so signs that the Chinese economy is in better shape than anticipated will be a boost to silver’s fortunes. Already the metal has a strong fundamental outlook with demand outstripping supply for the last few years and set to remain that way for years yet so increased Chinese demand will only exacerbate that trend.
Against silver’s outstanding fundamental case is the high interest rates around the world with the European Central Bank implementing its tenth successive hike yesterday and rates set to remain higher for longer. This is clearly weighing on the silver price currently, with the physical metal’s lack of yield making it less attractive during periods of high and rising rates, however, the current price still looks considerably below the fair value for the metal making further gains far likelier than any more drops.
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.
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