Silver Prices Cool With The Global Inflationary Slowdown

The price of silver is under pressure as inflation cools across the globe.

XAGUSD: Daily Chart

XAGUSD: Daily Chart

Silver recently rallied above $25 but has since slipped back to below $24.

Friday’s US jobs numbers have led to a slip in silver as the hiring slowdown hurts the outlook for higher inflation. Precious metals are seen as a hedge against higher prices, and that will cool demand.

In a new price forecast, Kieran Tompkins, commodities economist at Capital Economics, warned investors that silver could be neutral for the rest of the year. Prices could fall back to $22.50, he said.

Tompkins said that the most significant factor impacting silver is the US dollar, and the British-based research firm expects 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.

However, looking beyond the current year, Thompkins said that he expects silver’s fortunes to improve in 2024. He expects to see prices end the next year at around $25 an ounce. The reasoning for this is that a shift in US monetary policy as a recession continues will grow investment demand for silver, which has been sluggish through 2023.

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