Silver Prices Soar As Global Demand Grows

As major economies seem to avoid recession by going for a so-called by analysts, soft landing, metal prices such as gold, silver and copper, tend to stay high in the last few months. Despite manufacturing activity facing headwinds in some economies, metal prices have weathered the economic slowdown.

Gold has broken all-time records; copper has followed suit and  silver prices are elevated. In our article we will examine how silver prices have reacted to the high interest rate environment in times that most major economies seek ways to exit monetary tightening policies.

Silver Prices Climb, Hitting A Three-Year High

Silver climbed above the $30 barrier on May 17th, rewriting the highs from January 2021. The metal’s prices have been pushed up by China’s new policies related to the stabilisation of the country’s property sector that has been struggling for more than a year and rekindled hopes for U.S. interest rate cuts following a convenient, for the Fed’s targets, consumer inflation report.

A Wall Street Journal report on silver prices cited Sprott market analysts saying that due to the close correlation between them, silver prices could follow gold in terms of upward trajectory. 

Commenting on silver prices, they suggested that “similar to how gold bullion has soared due to a new wave of major purchasers among central banks and sovereign entities, silver has and will likely see even more substantial buying from the photovoltaic industry.”

Historical Silver Prices: A Tale Of Up And Downs

Studying the history of silver prices, we observe that silver crossed the $50 mark two times in the last 44 years. The last time that silver prices reached the $30 mark was three years ago.

In 1980, silver prices soared to around $50 per ounce, largely due to the Hunt brothers' attempt to corner the silver market. Nelson and William Hunt, wealthy oil heirs, aggressively bought silver futures contracts, driving up prices. Their actions, combined with inflation fears and geopolitical tensions, led to a speculative bubble. When regulatory changes and market responses forced the Hunts to liquidate their positions, silver prices plummeted rapidly.

In 2010-2011, silver prices spiked significantly, reaching nearly $50 per ounce in April 2011. This surge was driven by heightened investor demand for safe-haven assets amid economic uncertainty post-2008 financial crisis, inflation concerns, and robust industrial demand for silver. Additionally, speculative trading and increased investment in silver ETFs contributed to the rapid price escalation. However, this peak was short-lived, and prices subsequently declined due to market corrections and profit-taking.

In 2021, silver prices experienced another surge, briefly exceeding $30 per ounce. This spike was influenced by a mix of economic uncertainty, increased industrial demand, and retail investor activity. The COVID-19 pandemic had disrupted supply chains and heightened demand for precious metals as safe-haven assets. Additionally, a social media-driven movement, inspired by the success of the GameStop stock boost, encouraged individual investors to buy silver, further driving up prices.

These peaks highlight silver's susceptibility to market speculation, economic factors, and investor sentiment.

Silver Prices: What Do Analysts Say

As silver prices have surged in the last few weeks, market analysts are in the process of evaluating how silver’s supply and demand could impact prices, including other external factors as monetary policies in major economies.

World Silver Survey 2024: Silver Market Deficit To Grow

The Silver Institute has published the World Silver Survey for 34 consecutive years, starting in 1990. The survey’s purpose is to provide market participants with a comprehensive look at the global silver market.

In the latest World Silver Survey 2024 report, the market outlook for 2024 stressed the following: “The likely easing of US monetary policy is expected to drive a notable rally in precious metal prices, although short-term downside risks persist. Silver will benefit from this, but major price gains and a narrowing of the gold: silver ratio may have to wait until tightness in physical silver markets develop. Silver’s market deficit is expected to grow by 17% in 2024 as supply stagnates and industrial demand posts another record. Deficits should also continue, depleting currently ample inventories.”

ANZ: Market For Silver Is Undersupplied

Just a month ago, a report published by ANZ specialists had forecast that silver prices may rise above the $30 mark.

In their note to investors, ANZ’s economists suggested that “slower mine production growth and strong industrial demand suggest supply is lagging demand. This will keep the market in a structural deficit. An upturn in the electronic cycle and potential demand growth from the solar sector bodes well for silver’s industrial consumption. An undersupplied market leaves room for further withdrawal of above-ground inventories with the London Bullion Market Association (LBMA) and exchanges. Multi-year low stocks along with negative market balance warrant higher silver prices.”

TDS: Demand Growth Could Deplete Inventories In Next Years

A report by TD Securities in April 2024 showed that its economists favoured trading silver on the back of Fed’s anticipated monetary policy loosening and high demand observed in global markets.

In their report they suggested that “silver could just be the most exciting trade of the energy transition that no one is talking about. The current pace of demand growth is set to completely deplete our estimates of the LBMA's 'free floating' inventories over the next two years, with a Fed cutting cycle potentially shrinking this timespan to less than twelve months. This creates a significant liquidity risk that could dramatically fatten silver's right tail. This thesis has little to do with recent price action, and in fact our advanced positioning analytics suggest the timing for silver upsides isn't great. We expect CTA selling activity to weigh on silver markets unless prices can rally north of $27.50/oz in active silver.”

Trading Silver With Admirals

Admirals traders can trade silver using the type of trading account that matches their needs. However, if you prefer to trade metals or other popular commodities, an account with Admirals gives you access to instruments such as gold, copper, platinum, palladium and others.

One of the biggest problems for beginner traders is the absence of experience. Unfortunately for them, trading can be a very quick process that sometimes is hard to be managed efficiently even by more experienced traders. As there is no way to substitute experience things may look difficult for beginner traders. However, there is a way for beginners to improve their position and this is done by improving their knowledge through educational materials such as webinars, articles, guides etc., that brokers offer, sometimes even for free. 

Last but not least is the need for risk management. While delving into educational materials, beginner traders should pay special attention to the use of risk management tools such as the stop loss order or the take profit order.

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.