Silver’s failure to hold above $25 an ounce highlights how hostage the precious metal has become to the words and actions of the Federal Reserve rather than the metal’s underlying physical supply and demand dynamics.
From an industrial outlook perspective, silver is well supported by metal a key component of the energy transition, used in both the solar and electric vehicle industries among others, with a demand outlook that looks very positive in both the short and medium term.
However, as was clearly shown during last year’s multi-month price slump, strong fundamentals are not enough for silver with this bullish physical outlook far outweighed by the Fed’s implementation of a series of large interest rate hikes, a cycle that may be drawing close to its end but is nonetheless still yet to finish.
Perhaps after such a spectacular rally in which silver surged over $5 an ounce in just over a month, a gain of more than 25%, a correction in the price was to be expected. However, even with the recent gains, silver failed to return to the high achieved in March last year, just prior to the Fed’s adoption of its aggressive monetary policy.
So while silver investors will doubtless be frustrated at the metal’s failure to build on the recent rally, a bold investor may yet see the latest dip in the price as another opportunity to top up their holdings by buying into the metal’s strong fundamental outlook that may finally get a look in once the Fed’s rate hike cycle ends.
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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