Silver ended Tuesday trading down marginally at $23.5 per ounce, weathering both rising US rate headwinds and persistent economic growth concerns for 2024. However, structural industrial demand trends continue to provide something of a cushion to a cyclical growth downturn.
As a zero-yielding asset, physical silver (and gold) has been hampered by the recent – but thus far modest – back up in US rates markets. While this sensitivity is generally less pronounced than that of gold, silver additionally exhibits price sensitivity to economic growth arising from the 45-50% of silver demand derived from industrial applications.
Silver is thus a beneficiary of a ‘soft landing’ scenario for the global economy, and this remains the consensus outlook. However, risks currently appear to be skewed to the downside, with the most recent economic data being softer than expected. European data remains especially weak, and the global picture is now disappointing again for the first time in six months.
While these global growth uncertainties will likely test the resilience of silver for some time, downside pricing risks are mitigated by a silver market that appears to have remained in supply deficit for a third consecutive year in 2023. Secular demand growth in applications such as photovoltaics lends further support going forward.
Frank’s experience covering the commodities markets spans 22 years, with a particular specialism in metals, carbon and energy markets. He has worked as a senior editor for S&P Global Commodity Insights (formerly Platts) and before this, at ICIS-LOR, a part of Reed Business Information (Reed Elsevier), where he covered the petrochemicals markets from 2003 to 2005.
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