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Silver price will grow show signals

Actual trends in the global economy and an expected growth in demand caused by new technologies could spark silver price recovery from its current low levels. According to our analysis, the demand for silver is particularly driven by the ongoing boom in the solar energy industry and demand for photovoltaic installations. Egypt is one of the countries

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Actual trends in the global economy and an expected growth in demand caused by new technologies could spark silver price recovery from its current low levels. According to our analysis, the demand for silver is particularly driven by the ongoing boom in the solar energy industry and demand for photovoltaic installations.

Egypt is one of the countries which should experience the highest photovoltaic upswing this year.

The current price of silver

The current price of silver ranges between 15.4 to 15.8 USD/oz and as the cost of mining varies from 9 to 15 USD depending on availability and mining demands. Such a situation is not sustainable in the long term. The decline in price in the past years was caused by lower demand and increased FED interest rates. The same scenario is widely expected in the near future as the rates could be raised further in order to strengthen USD which could put the commodities under pressure.

However, precious metals represent a safe harbor when the economic expansion is over and the economy starts to overheat. Such is the situation nowadays. There are indications of an economic slowdown in Germany, Turkey and in the USA as well. Negative fundamentals are present on the market – eurozone countries are in debt, minimal interest rates, possible trade war etc. It can be thus reasonably expected that the investors will move their capital form stock markets to “safe haven” commodities.

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The silver supply falls, the industrial demand rises

Skeptics say that silver has been traded under its production costs repeatedly in the past and “survived”. However, there are signals indicating the rise in the precious metal price. For instance, the silver production is lowest since 2012, its reserves are decreasing and the technology sectors, especially photovoltaics, are showing increased demand. Mr. Jaroslav Kriz, the head of technology and innovation for a significant international investor in the segment, the Solek Group, has expressed a clear statement: “As a result of the global solar boom, we expect 30 % annual increase in demand for solar installations this year. We are executing a massive transaction for big projects in Chile. Besides the Latin America countries, the leaders of this year’s growth will traditionally be China, India and perhaps Egypt.”

The silver stock level was reduced by 12 % just in the span of the years 2016 and 2017. A similar decline is expected this year as well. The actual development of demand remains in question. The demand was falling throughout 2016 and 2017. However, already last year a significant change in terms of industrial fundamentals has come ashore. This has been evidenced by hard numbers so far in 2018. If the demand rate stays stable, or its fall would not be as big as the decrease in reserves, this would be a clear indication of silver price growth.

To summarize, it is essential to bear in mind that the silver is being traded under its production costs. The current situation which has been influenced by longtime expansion and stock market stability may still last for a couple of months, but will likely change in the near future. Taking this into account, involving silver into one’s portfolio to diversify it is definitely worth considering.

Would you like to start trading silver and other commodities? Register today.

Mahmoud Hamdy Abo Hadima
Senior Analyst
Gulf Brokers

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