Silver Price Outlook

“Silver’s price performance contrasted with that of gold during January in that while gold prices went from strength to strength during the month, silver prices were range bound and unable to settle above the $24.50 level. That said, this level was where silver prices stood in April 2022, which puts it on par with gold, which also at its recent peak in February had risen to levels seen in April 2022.

The seeming divergence in gold and silver price performance during January can be explained by the fact that silver prices took off sooner and more strongly than gold prices late last year. This had resulted in the gold:silver price ratio slipping to a 15-month low in December 2022. The strength in gold prices and the sideways movement in silver prices in January allowed the ratio to rise back to 83.7 in January from 75.7 in December.

Like gold, silver prices too responded negatively to the strong U.S. jobs report. After declining, prices have been consolidating in a strong area of support between $22.00 and $22.50. Silver prices may take clues from gold for direction. Various political and macroeconomic factors that are expected to influence gold prices also are expected to move silver prices. Investors are likely to buy silver as a safe haven asset ahead of what may be contentious debt ceiling talks in the United States, and the ongoing deterioration of relations between China and the United States could also draw some safe haven buying from investors. The recent pull back in silver prices after the January U.S. jobs report provides these investors a good entry point.

The relatively high silver price and the prospects of slowing economic growth could act as headwinds to silver prices in the medium-term, especially in more price sensitive sectors like jewelry but also to silver demand from the auto sector. However, demand for silver from some sectors like the solar panel industry are likely to be more resilient both to prices and economic conditions given the heavy focus around the world on producing renewable and green energy. Silver prices are forecast to consolidate around $22.20 with the potential to head higher toward the price range observed over the course of January.

Silver prices typically experience seasonal strength through April, which could provide additional support to silver prices in coming months. Any signs of further softening in inflation could add further upside pressure on silver prices. Silver prices along with other assets could face some softness beyond the Fed’s next meeting, in the second half of March, if the Fed continues to project holding rates steady through 2023, a view that has not been accepted or priced in so far by the market.”