Silver has dropped almost 50% from its January record after a trading frenzy collapsed, yet industrial demand remains strong. Analysts see a disconnect between the metal’s traded value and its role as a critical material, with one forecast putting prices in the $110 to $130 range next year.
Silver has fallen almost 50% from its January record even as demand for the metal holds stronger than ever, a gap that analysts say could lift prices into next year. Prices declined by about half from late January record-high levels of $121.79 an ounce intraday and $115.50 at settlement, according to Dow Jones Market Data. Those highs were followed by a more than 30% one-day drop, the biggest in almost half a century.
Beyond its role as a precious metal, silver serves industrial uses spanning electronics, solar, military defense, artificial-intelligence data centers, and electric vehicles. That dual purpose could mean a disconnect has developed between the metal’s traded value and its importance as a critical material. The core demand story remains intact, said Jan Skoyles, head of research at GoldCore.
Futures traded like a meme stock
The market was left vulnerable to sharp selloffs after the last leg of the parabolic run-up to the January high, which was likely momentum-driven rather than fundamentally driven, said Nick Cawley, contributing analyst at Solomon Global. He said the nearly 50% retracement may interest long-term value investors, especially as industrial demand stays relatively untroubled by recent events in the Middle East.
Yet Cawley cautioned that with global interest rates potentially set to move higher to quell inflation, investors should be in no rush to buy silver-related assets. Silver has lost nearly 12% year to date, outpacing gold’s 4.30% decline, with both metals pressured by a stronger U.S. dollar and expectations for higher Federal Reserve rates.
Building a base near $60
Some of the earlier run-up traced to India’s decision in early December to allow pension funds to buy gold and silver for the first time, worries over export restrictions from China — where 60% of global supply comes from — and multiyear supply deficits, said Robert Minter of Aberdeen Investments. Those factors drew short-term, meme-stock buyers, most of whom appear to have left at the first sign of weakness.
Paul Mladjenovic, author of “Investing in Gold and Silver for Dummies,” said the mania lifted prices to triple digits too quickly, and the price needed to build its base to roughly between $58 and $62 an ounce. Silver’s September contract was last pegged at $62.16 an ounce on Comex. He expects silver to end the year around $80 an ounce and test the $110 to $130 range next year, a forecast that keeps the metal on the radar for those learning how to trade silver.
Source: MarketWatch
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