A disappointing start to 2023 got suddenly worse for silver with the price sinking by $1.50 an ounce to a little above $22 an ounce after Friday’s US jobs figures proved unexpectedly strong.
With the US jobs market running so hot, this has given the Federal Reserve far more scope to continue its policy of hiking interest rates to ensure that inflation continues on its downward trajectory back to the bank’s 2% target. With more hikes now likely, gold has suffered due to its lack of yield making it less attractive at times of rising interest rates.
Now with more hikes likely over the coming months, silver has once again found itself rejected by investors as the metal’s lack of yield makes other interest-bearing assets more attractive. For example, the digital silver product, Silver KAG, does generate a yield in contrast to the physical metal that underpins it, providing holders with a monthly return based on transactions using the currency.
The problem for silver is that as the price had largely drifted sideways this year, unlike its precious metal peer gold which had made significant gains, the plunge in price has pushed it down to levels not seen since early December.
Yet while the initial reaction to Friday’s jobs data proved negative for silver, there are still strands of optimism to extract from the current picture. A buoyant US economy, driven by policies that put the energy transition at the forefront, is likely to drive demand for solar energy even higher, boosting the need for silver which is a key component of photovoltaic cells.
Given how strong the fundamental case for silver still is, the sharp drop in the price should present an ideal buying opportunity for brave investors willing to see the broader picture in which silver demand outstrips supply.
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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