The silver price has been doing well even though other industrial metals such as iron ore and Copper have crashed. Silver has increased by 25.50% this year, surpassing gold which is currently at a record-high.
Copper, which is a barometer for the global economy and is often used as a gauge, has fallen by more than 20% since its peak this year. Iron ore is used in the production of steel and has fallen by more than 32% since its year-to date high.
Aluminum has been rising recently but it is still 10% below its highest level of this year. Nickel, lithium and cobalt are also metals that have retreated.
The global economy is easing
Metals for industrial use have plummeted amid fears that the commodity supercycle which began after the Covid-19 outbreak has ended. In fact, commodities like wheat, soybeans and corn have all fallen sharply in the past year.
Metals prices have fallen as concern about the Chinese economy continues. The FT reported that China’s $70 billion fund to address the housing crisis has been slow to start on Wednesday.
Beijing says that local governments will use the funds to finish unfinished homes and then rent them out as social housing. Only a small portion of the funds has been distributed, so the recovery in the sector will be slower.
China is a major metals producer, as it is the largest industrial nation in the world. It buys, for example, more than 60% all the iron ore produced worldwide.
China is a major buyer of silver. This metal is used in various products, such as jewelry, solar panels and electric vehicles. Silver plays a minor role in the production of high-performance computer chips.
Silver prices have risen due to the slow growth of mining and recycling. Silver Institute data estimates the total silver supply will be one billion ounces for this year. The Silver Institute expects mine production to fall by 1%, to 823 millions ounces. Recycling will be 178,000,000.
On the other hand, demand is expected to be strong. The Institute estimates that the demand will increase to 1,26 billion ounces. This leaves the industry with a supply deficit of 265 million. Silver, like other industries, does well when demand is greater than supply.
Silver and the Federal Reserve
The XAG has done well as it is seen as a cheaper option to gold, which is the largest precious metal in existence.
Gold reached a new record on Wednesday, trading at $2,500. Some retail investors think that silver, which is less than $30, would be a better option.
The ETF inflows continue to show this trend. The iShares Silver (SLV) ETF, which tracks silver prices, has seen an increase of over $902,000,000 in assets. The majority of these inflows occurred in the past three months, increasing total assets to more than $13 billion.
Silver is also driven by the hope that the Federal Reserve may start reducing interest rates in the near future. Silver does well in most cases when the Fed cuts rates as we saw with the Covid-19 pandemic.
The upcoming Jackson Hole Symposium will therefore be important for gold, silver, and the US Dollar. The Fed Chair is likely to confirm in the meeting that the bank’s interest rates will be lowered in September. This is why the US Dollar Index (DXY), which has fallen from $101 to $100, will also be discussed.
Silver also responds to the US public debt which has reached a record of $35.1 trillion. Donald Trump and Kamala Harri have yet to deliver any concrete plans for reducing the deficit.
Kamala Harris, however, has addressed this issue in the case of this election by promising to raise corporate tax rates to 28%. This would reduce debt by more than $1 trillion over a decade. This measure is unlikely to pass until Democrats take control of the Senate and House of Representatives.
Gold and silver are considered safe assets because of the persistent inflation and soaring debt.
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Silver Price Forecast
Silver’s chart on a weekly basis is a treasure trove for technical analysts. Silver formed an inverse chart pattern of a head and shoulders, which leads to a lot more upside. The chart has also shown a cup-and-handle pattern with the recent pullback occurring in the handle section.
Silver is still above the moving average of 50 weeks. Silver has also formed an expanding wedge falling pattern. There is a high probability that silver will rebound in the next few months. Initial target is the high for this year of 32.46. If it moves above this level, the price will rise to $35.
This post Silver Price: XAG Technicals, Fundamentals Align, SLV Inflows Rise may be updated as new developments unfold.
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