The silver price has been on an upward trend, reaching around $32.25 during the early European session, marking a 0.50% increase for the day. A key factor contributing to this rise is the growing industrial demand for silver. According to projections from the Silver Institute, the total industrial demand for silver is expected to increase by 9% to 711 million ounces. This surge is primarily driven by the demand from the photovoltaic sector. Additionally, UBS analysts anticipate a substantial deficit in the silver market, with an undersupply of 215.3 million ounces expected for the year, which represents 17% of the world demand. This imbalance in supply and demand dynamics may continue to support the upside for the white metal.
Moreover, geopolitical tensions in the Middle East have also played a role in boosting silver prices. Israeli Prime Minister Benjamin Netanyahu’s vow to continue the war against Hamas following an air strike that resulted in the deaths of at least 45 people in Rafah has raised concerns about stability in the region. This uncertainty has led investors to seek safe-haven assets like silver, further contributing to the price rally.
Despite the positive factors propelling silver prices, there are concerns that the upbeat US economic data and the hawkish tone from the Federal Reserve could limit the metal’s upside potential. The US GDP numbers for Q1 and the Core PCE Price Index are anticipated to provide fresh impetus for the market. The Fed’s messaging, particularly from Fed Minneapolis President Neel Kashkari, has hinted at a cautious approach towards monetary policy. Kashkari mentioned that the central bank should wait for significant progress on inflation before considering rate cuts, indicating that only a maximum of two rate cuts are expected by 2024.
These factors suggest that while industrial demand and geopolitical risks are supporting silver prices, the US economic data and the Fed’s stance may act as counterforces, capping the white metal’s further upside. Investors will be closely monitoring developments in these areas to gauge the direction of the silver market in the coming days.