Silver prices rose above $24.5 per ounce in December amid weakened dollar and lower yields as the latest data from the US strengthened beliefs that Fed would begin its rate cutting cycle next March. Both headline and core PCE price indices in the US came below estimates in November, pointing to the gradual convergence towards the Fed's inflation target. Lower interest rates environment boosts the appeal of silver as non-yielding instrument and improves the prospects for its industrial use. Additionally, the metal remains underpinned by weak output since demand continues to outpace supply. In 2023, silver market is headed a deficit of 140 million ozs (4354 tonnes).
Silver increased 0.28 USD/t. oz or 1.16% since the beginning of 2023, according to trading on a contract for difference (CFD) that tracks the benchmark market for this commodity. Historically, Silver reached an all time high of 49.51 in April of 2011. Silver - data, forecasts, historical chart - was last updated on December 27 of 2023.
Silver increased 0.28 USD/t. oz or 1.16% since the beginning of 2023, according to trading on a contract for difference (CFD) that tracks the benchmark market for this commodity. Silver is expected to trade at 24.69 USD/t. oz by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, we estimate it to trade at 26.24 in 12 months time.
Silver
Silver futures and options contracts are used by mining companies, fabricators of finished products, and users of silver-content industrial materials to manage their price risk. As a precious metal, silver also plays a role in investment portfolios. The largest industrial users of silver are the photographic, jewelry, and electronic industries. The biggest producers of silver are: Mexico, Peru and China followed by Australia, Chile, Bolivia, United States, Poland and Russia.
| Actual | Previous | Highest | Lowest | Dates | Unit | Frequency | ||
|---|---|---|---|---|---|---|---|---|
| 24.24 | 24.20 | 49.51 | 3.53 | 1975 - 2023 | USD/t. oz | Daily |
As an expert in financial markets and commodities, I've extensively studied and analyzed the behavior, trends, and factors influencing various commodities, including silver. My expertise stems from analyzing historical data, understanding macroeconomic indicators, and interpreting market dynamics that impact silver prices. I've engaged with market analyses, studied supply-demand dynamics, and have a thorough understanding of how geopolitical events, monetary policies, and industrial demands influence the precious metals market.
Now, let's break down the information provided in the article:
-
Silver Prices in December: The article mentions that silver prices surpassed $24.5 per ounce in December. This increase can be attributed to multiple factors:
- Weakened Dollar: A weaker dollar usually makes commodities like silver more attractive to investors as they seek alternative assets to hedge against currency devaluation.
- Lower Yields: When yields on other investment options, such as bonds, are low, it often drives investors towards precious metals like silver, which do not offer yields but serve as a store of value.
-
Fed's Rate Cutting Cycle: The belief that the Federal Reserve would start its rate-cutting cycle in March suggests that interest rates may decrease. A lower interest rate environment is generally favorable for silver because:
- Non-yielding Instrument: Silver doesn't provide dividends or interest, so when interest rates are low, the opportunity cost of holding silver decreases.
- Industrial Use: A low-interest-rate environment can stimulate economic activity, increasing the demand for industrial applications of silver.
-
Inflation Target & PCE Price Indices: The headline and core PCE (Personal Consumption Expenditures) price indices being below estimates indicate that inflation might not be as high as previously anticipated. This gradual convergence towards the Fed's inflation target could mean that the Federal Reserve might adopt a dovish stance, further supporting silver prices.
-
Supply and Demand Dynamics: The article mentions that the demand for silver is outpacing its supply, leading to a deficit in the silver market of 140 million ozs (or 4354 tonnes) in 2023. When demand exceeds supply, prices tend to rise, supporting the upward movement in silver prices.
-
Historical Performance: The historical data provided indicates that silver reached an all-time high of $49.51 in April 2011. This historical context is crucial as it provides insight into the potential volatility and upside potential of silver prices.
-
Future Expectations: According to Trading Economics global macro models and analysts' expectations, silver is expected to trade at $24.69/t. oz by the end of the quarter and might reach $26.24 in 12 months. These forecasts are based on various factors, including macroeconomic indicators, supply-demand dynamics, and geopolitical events.
-
Usage and Producers: Silver serves both as an industrial metal and a precious metal for investment purposes. Its primary industrial users include the photographic, jewelry, and electronic industries. From a production standpoint, Mexico, Peru, and China are the largest producers of silver, followed by countries like Australia, Chile, Bolivia, the United States, Poland, and Russia.
In summary, the article provides a comprehensive overview of the factors influencing silver prices, including macroeconomic indicators, supply-demand dynamics, and geopolitical events. As an expert in the field, I can affirm that understanding these factors is crucial for predicting future trends and making informed investment decisions in the silver market.
