The Silver Rush: What’s Driving the Price Upswing?

Overview

If you have been a regular market observer, the ultimate upswing in silver price must have left you astonished. The retailers and traders are trying hard to join the upward rally and make profits out of it. 

But the question is what is the driver of this sudden upswing? It is one of the rare times when silver has exceptionally surpassed the demand for gold, making it one of the most precious metals. To date, it has been observed that silver has shown a good growth of 6-10% yearly. In 2023, silver gained 7.19%, which is termed as a good gain. But, in early 2024, silver is trading at Rs86,500. Year-to-date, it has gained over 12%, and not even half of the year has passed. 

Why is Silver price Going Up? 

Well, the precious metal is not only precious for our ornaments but for humongous industrial use. The electronics and solar energy sector has a huge demand for silver as an excellent semiconductor. Apart from this, silver is quite popular among Indian households. People always anticipate gold and silver as a precious and safest investment. 

How Silver is Helping Industries? 

Silver is known for its excellent conductivity. Industries are always rooting for it as their vital component in electronics such as motherboards and other electrical contacts. Following, solar panels and automobiles also need silver as in photovoltaics. It extensively helps in encompassing batteries, making them a good conductor and increasing their life and electrical wiring in the solar panels. 

Being in the age of sustainable development, the government, as well as all big market players are finding ways to run business while protecting the environment and cutting electricity costs. Solar energy has emerged to be the best way for this. With global demand in semiconductors, IoT, Medical Devices, and Battery equipment, the silver price is bound to rise more from here*.

Demand and supply of silver 

Certainly! Here’s the corrected version:

Demand and supply dynamics involve the buying and selling of a product or security. Currently, the world is experiencing increased demand for silver due to its usage across various sectors. Whether it’s the IT sector, automotive industry, or the precious metals sector, all have collectively driven up demand for silver.

In the era of electric automobiles, the demand for silver has surged. Silver is being used in the semiconductor chips used in automobiles, and the growing demand for sustainable vehicles has further boosted the need for silver, consequently affecting its prices.

Additionally, the IT sector is witnessing a boom with the advent of new technologies and AI integration. The chips and motherboards in IT devices require silver for better quality and enhanced conductivity. Given that silver is an excellent conductor, it finds significant use in transportation, nanotechnology, biotechnology, healthcare, consumer wearables, computing, and energy in data centers.

Also Read: Healthcare Sector

Demand and Supply Technical Analysis

Corresponding to the increased demand, the supply of silver is heavily constrained due to limited mines. This constrained supply has driven up the silver price.

Furthermore, from a technical standpoint, analyzing the demand and supply of silver reveals a significant price surge, with demand zones being consistently followed. By observing the silver chart, the price boom could have been easily predicted with the aid of demand and supply theory aligned with price action.

Silver is a Safe Investment for Retailers

In India, people are always looking to be in the back seat when it comes to investment. They want to be safe from every possible crash and go with the traditional method of investing. Precious metal is one of them. Amidst the global tension of recession and Wars, the focus of Indian retail investors has significantly shifted towards precious metals. They are aiming to put their money in the safest possible place, that is none other than silver and gold. 

People are investing in silver to hedge against inflation and be in the safest corner of the market when any sudden crash comes. India, the world’s largest silver consumer, plays a critical role in the global silver market. Several factors contribute to the rising domestic demand for silver.

Mines of Silver

The demand is surged, leading to a constrained supply of silver. With the simple and most basic rule of demand and supply, the price is bound to rise when there is a shortage of mines compared to the demand. Recently, new silver mines have opened in Mexico and Chile. With the mines being huge, they still contribute to only 5% of production. This clearly shows how constrained the world is for precious metals. 

Silver is getting scarce because, with the rigorous mining, the mines are running out of resources. More time is needed to find and set up new mines to fulfill the surged demand. Though, experts predict that more mines have been found and their work is going in full swing, the supply of silver is expected to rise compared to the past eight years. 

Even the silver mining industry can caught up in political issues, making it much more difficult to extract silver from the earth. For example, when governments disagree, it impacts areas where silver is found with other metals. In South America, these geopolitical debates are leading several mines to close this year since they are unable to produce as much silver as before.

USA Economy and Silver Price

The US dollar dynamics are not all stable, amid the war and recession tensions, traders and investors fear this volatility, especially the ones focused on precious metal trades. 

USD marked its peak in 2022 and since then witnessed a downtrend, which is an important factor in the trajectory of metals. 

This downtrend is influenced by government policies and the economic health of the country. As of April 2024, the inflation rate of the USA is 3.4%, which is quite high. It signifies that prices of things, especially commodities are going up, decreasing the value of money. This is one of the huge reasons that gold and silver prices are going up. 

Experts expect that the Federal Reserve, which handles the country’s money, will continue to change its policies to prevent inflation. They might boost interest rates, making the dollar stronger, or cut them, making it weaker. This, in turn, influences the value of silver.

International Politics Involved in Silver

A lot of things happening around the world are successful in shaking up the commodity market, especially gold and silver prices. Powerful economies like India, South Africa, Brazil, and Turkey are witnessing shifts in power and internal political tensions, resulting in traders and investors panicking. This is clearly affecting the prices silvery is currently traded at. 

Reduced global supply chain risk as governments prioritize domestic production over imports; increased geopolitical conflicts over AI and marine routes; Furthermore, with elections taking place in nations that account for more than half of the world’s population and nearly 60% of the global economy, there is a high likelihood of changes that will affect silver trading.

Tensions between the US and China

Two economic giants; the USA and China are creating havoc in the financial market with their ongoing geopolitical tensions. Seeing the current situation of the market, if the peace isn’t made between both parties then financial markets can be disrupted. When situations like this arise, investors always go to precious metal investment, with the mindset of the safest investment. 

In addition, concerns about climate change and energy security may have an indirect impact on silver trading.

All of these variables contribute to a complex and potentially unpredictable scenario in the silver market.  

Is it a Good Time to Buy Silver? 

We all know silver has seen more than 10% growth this year and we are not through half of the year. Before entering into silver investment first, define your investment goal and risk tolerance. With this surge in demand, the supply of silver is constrained, so getting entry at the right point might be tough. The silver price is still going to see positive movement according to industry experts. But, it’s better to enter the market with a long-term perspective instead of going to make quick profits. 

It’s recommended to do your own research before making any decision in commodities or any other security market. Use the laws of demand and supply in the candlestick charts and find out what are good entry and exit points for silver. 

Cutting it Short

To summarize, the recent spike in silver prices is caused by a variety of causes, including increasing industrial demand, geopolitical concerns, currency dynamics, and global supply chain disruptions. While these factors contribute to a complex and volatile market, silver remains an appealing investment alternative for many, especially in the face of economic uncertainty. However, timing the market necessitates a comprehensive assessment of one’s financial objectives and risk tolerance. Conducting extensive study and getting advice from financial experts can help you navigate the turbulent terrain of silver trading and make smart long-term investing decisions.

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