Silver investors will be hoping that the recent tentative recovery that sees the metal once again trading above $18 an ounce is evidence that the price has well and truly hit its bottom after the false hope of July’s recovery.
The metal remains under considerable pressure from central banks across the world intent on raising interest rates as they try to bring runaway inflation under control. Yet while it is hard to see silver making huge gains in such a hawkish environment, the price had fallen so far below its true value, given a buoyant fundamental demand outlook, that the metal represents a buying opportunity.
Its lack of yield may make it less attractive at times of rising interest rates while a US dollar trading near its record level presents a further headwind yet silver remains a highly important metal used in key sectors of the energy transition such as in photovoltaics for solar panels and in batteries for electric vehicles.
From this perspective, it is hard to justify quite why silver has sunk so low and traders are taking advantage of its cheapness to increase their exposure with the aim of benefiting once these hawkish clouds clear.
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