Silver has slipped comfortably below $23 an ounce in a week which has brought confirmation of the Federal Reserve and the Bank of England keeping their interest rates above 5% and set to keep them there for a good while yet.
This high interest rate environment is negative for silver with the physical metal’s lack of yield making it less attractive compared with interest-bearing asset classes. While the precious metal does retain some safe-haven appeal, it is unlike the higher levels gold can often expect from the increased macroeconomic uncertainty caused by Israel’s attacks on Gaza.
Set against this challenging macroeconomic climate is the fact that silver remains in strong demand in several key industrial sectors such as solar energy and the broader electrification of many aspects of our lives. As such, demand for the metal is set to continue to outpace supply for several years yet and this should provide a strong floor on how much further the price can fall.
Today’s US jobs data is likely to bring confirmation that the world’s largest economy remains in good health and this should be supportive of the broader demand narrative for silver. This could be enough to see silver climb back to $23 but even this level is significantly below where the natural supply/demand dynamic of the metal suggests it should be.
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