Silver has struggled so far this week, failing to hold the pricing surge seen in Friday’s trading and at $22.5 per ounce, has slipped to a three-week low.
Like gold, silver has been impacted by rising US bond yields, but is also more exposed to incoming data suggesting more fragile growth prospects.
The Federal Reserve remains determined to maintain a ‘higher for longer’ narrative on rates, and for much of the last two years, this has been supported by economic growth (and inflation) which has been more resilient than expected. However, weakness in the US housing market now appears to be spreading to weak job creation and consumer confidence is falling. Recent data from China and the Eurozone have also disappointed.
This dynamic is potentially problematic for silver, given that c. 45-50% of silver usage is linked to industrial applications and economic growth. A ‘hard landing’ for the global economy prompted by overly tight monetary policy would certainly impact silver demand, even if secular growth stories, such as photovoltaics, remain intact.
On a positive note, markets have grown increasingly sceptical of the Fed’s stance, with US rate cuts in 1H 2024 now being factored into futures pricing. However, this has yet to feed through to longer rates (bonds), which have rebounded this week. Receding long rates facilitating an economic ‘soft landing’ remains the elusive sweet spot for silver investors.
This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.
Read our Editorial Guidelines here.