Sep 05, 2023

The price of silver is under pressure as inflationary pressures ease around the world.

XAGUSD Daily Chart

XAGUSD: Daily Chart

The price of silver recently surged above $25 per ounce, but has since declined to below $24 per ounce.

The US jobs report released on Friday caused silver prices to fall, as the slowdown in hiring dampened expectations of higher inflation. Precious metals are seen as a hedge against rising prices, so a decline in inflation expectations will reduce demand for silver.

In a new price forecast, Kieran Tompkins, a commodities economist at Capital Economics, warned investors that silver could be range-bound for the rest of the year, with prices potentially falling back to $22.50.

Tompkins asserted that the US dollar is the most significant factor impacting silver, and the British-based research firm anticipates the USD to continue to rise.

“In short, we think there is further scope for interest rate differentials to extend the US dollar’s recent rally over the rest of this year, weighing on the silver price,” he wrote.

Thompkins added that China’s growing slowdown could weaken silver jewellery demand, and soft electronic sales would also hurt demand for the precious metal. Global trends also suggest that weaker economic growth will be detrimental to silver’s industrial markets.

“The global electronics PMI suggests that there has been a renewed downturn in the industry,” he said. “Given the slowdown in economic activity we forecast in advanced economies, we suspect activity in the electronics sector will continue to deteriorate in the coming months.”

Despite the current year’s performance, Thompkins believes that silver’s fortunes will improve in 2024. He expects prices to end the year at around $25 per ounce. He bases this on the expectation that a shift in US monetary policy as the recession continues will increase investment demand for silver, which has been sluggish in 2023.

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