Silver extends gains to 3,8% as US dollar weakened 💵

SILVER continued its very strong gains today, further fueled by falling bond yields, a weaker dollar, market gains in China and a general improvement in risk sentiment on global markets.

• The long-term outlook for silver is also improving due to additional demand from the photovoltaic industry and limited supply from major mines. ANZ Research estimates that solar PV will leverage silver demand to 225 million ounces in 2025 versus an estimated 161 million ounces in 2023.
• Today, of course, the immediate reason for the gains in silver are mainly global factors and the covering of short positions by speculators expecting further declines in silver, which has seen weakness for days under pressure from the dollar and yields.
• As markets reassure themselves that interest rates may already be near their peaks, some analysts expect silver prices to rise in the event of a gradual easing of monetary policy in global terms. 

Will solar energy support demand for silver?

According to the Silver Institute, the silver market experienced a deficit of 237.7 million ounces in 2022, and deficits will continue in the coming years. However, the gap is being filled by huge above-ground inventories and quantities of the metal held by individuals and investors. 

According to Silver Institute analysts, demand for silver from the photovoltaic (PV) cells that make up solar panels has tripled over the past eight years to 160 million ounces (14% of total silver demand in 2023 versus 5% in 2014). The threat seems to be to reduce the silver content of the panels if prices prove to be a burden on producers but the room for reduction seems severely limited given the metal's utility.

Silver chart

Looking at the chart of SILVER we can see that the price has managed to rise again above the 38.2 Fibonacci retracement of the March 2020 upward wave and is now close to beating all three key moving averages, which run almost at the same level of $23.4 per ounce. A breakout above them could indicate the potential for a rebound toward $25.7 where we see the 23.6 Fibo level. On the daily interval, the RSI indicator, despite today's euphoric increases, is just over 53 points. The vicinity of $22.5 has proven to be a solid base for bulls in recent months - a possible renewed decline around this level could herald longer-term weakness.

Source: xStation5

Looking at the SILVER chart and the dollar index (USDIDX, gold color), we see that a strong upward impulse has re-emerged as the dollar reduces the recent very strong gains. At the same time, the trend line has been maintained.

Source: xStation5