Silver prices have been on the rise, driven by a supply and demand gap that has persisted for the fifth year in a row. With demand continuing to outstrip supply, the market deficit is expected to almost double by the end of 2024. Historically, the demand for silver was evenly split between industrial use and investment. However, industrial demand has seen significant growth in recent years, now accounting for 64% of global silver demand. This surge in industrial demand can be attributed to the Green Energy Transition, the rise of AI, and the increasing demand for electric vehicles.
Despite the bullish trend in silver prices, there are potential challenges on the horizon. A slowdown in the Chinese economy and prolonged high interest rates could put a damper on silver prices. A decrease in demand from China could help balance the supply and demand gap, while higher interest rates from central banks could halt the rally in silver prices. It is crucial to keep an eye on these factors to anticipate any potential shifts in the market.
The upcoming US CPI data has the potential to impact silver prices significantly. A positive inflation print could provide a boost to silver prices, while a negative print could push prices below the psychological level of 30.00. Despite short-term fluctuations, the overall bullish trend in silver prices is expected to remain intact. It is important for investors to stay informed and react accordingly to market developments.
Technical Analysis
From a technical standpoint, silver recently broke out of a bullish pennant pattern on the daily chart, leading to a rally above 31.50. The current consolidation phase has formed a new bullish pennant pattern, indicating potential further upside. Additionally, the 100-day moving average is nearing a golden cross with the 200-day moving average, suggesting continued bullish momentum. However, a close below the 30.600 level could indicate a shift in market structure, invalidating the current bullish setup.
The rise in silver prices is a result of the ongoing supply and demand dynamics, driven by increasing industrial demand and technological advancements. While there are potential challenges on the horizon, such as a slowdown in the Chinese economy and high interest rates, the overall trend in silver prices remains bullish. Investors should closely monitor market developments and technical indicators to make informed decisions regarding their investments in silver.