Silver is bouncing back from Wednesday’s decline, but the market remains challenging
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(Kitco News) – Growing uncertainty about industrial demand for silver creates some volatility in the market as the precious metal posts its fourth consecutive month of losses; However, some analysts see the sharp decline as a buying opportunity.
The price of silver fell to its lowest level since July 2020 on Wednesday, falling below $ 22 an ounce. The price has managed to rebound from its recent lows. Silver last traded at $ 22.175 an ounce in December, up more than 3% for the day.
According to some analysts, the silver market is facing an additional hurdle alongside rising bond yields and a stronger US dollar as political power struggles endanger the US government’s proposed $ 3.5 trillion spending package. Political posing also came as the nation ran ever closer to money, potentially sparking a global debt crisis.
Some of the geopolitical uncertainty has eased as politicians were able to pass a bridging measure to raise the debt ceiling to avoid a shutdown.
“It felt like silver went on sale yesterday and when something is on sale you have to buy it,” said Phillip Streible, chief market strategist at Blue Line Futures.
Despite the short-term volatility, many analysts remain bullish on silver over the long term, as they expect the global switch to green energy will boost industrial demand for precious metals.
Morgan Lekstrom, president of Silver Hammer Mining (formerly known as Lakewood Exploration), said the growing demand for clean energy and electric vehicles will make silver an important commodity, much like copper.
“Without copper, there is no robust economic growth. Silver is the same as technological advancement,” he said.
However, despite silver’s long-term potential, some analysts note that the current environment will remain challenging.
Carsten Fritsch, precious metals analyst at Commerzbank, found that the silver market is struggling to hold the attention and capital of investors. He said that in the last week alone, silver-backed exchange-traded products saw 160 tonnes of outflows.
“As long as gold remains under pressure, silver will also find it difficult to get off the defensive,” he said.
Ole Hansen, Head of Commodity Strategy at Saxo Bank, also expects silver and gold to suffer.
“With equity markets recovering, reducing diversification demand, and 10-year real yields trading near a three-month high, the near-term outlook for gold and silver remains difficult,” he said.
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