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Silver may have seen bottom after horrible run

Aug. 9, 2022 Updated Wed., Aug. 10, 2022 at 7:13 p.m.

Silver casting grain is shown in the foundry at the JSC Krastsvetmet non-ferrous metals plant in Krasnoyarsk, Russia, on July 12, 2021.  (Bloomberg )
Silver casting grain is shown in the foundry at the JSC Krastsvetmet non-ferrous metals plant in Krasnoyarsk, Russia, on July 12, 2021. (Bloomberg )
From staff and wire reports Bloomberg

From staff and wire reports

Silver has been the worst performer among major precious metals in 2022, but prices may have fallen far enough to spark a modest recovery.

The white metal has lost about 11%, weighed down by the stronger U.S. dollar, rising interest rates and slowing growth.

Anvita Patil, vice president of investor relations and treasure for Coeur d’Alene-based Hecla Mining Company, said the price of silver appears to be under pressure by investors who believe the economy is headed for a downturn. She noted that silver sometimes acts like a precious metal, like gold, and an industrial metal, for its superior electrical conductivity.

“Silver has been performing like an industrial metal, like copper and zinc, which is under the cloud of a possible recession,” Patil said. “But we like its longer term prospects.

“Silver will be indispensable to the overall decarbonization of the economy, so we expect it to rebound.”

James Steel, chief precious metals analyst at HSBC Securities USA, said prices could turn higher later this year as the electronics and photovoltaics sectors support industrial consumption, while retail and jewelry demand look strong.

“We believe silver is oversold,” Steel said. “Much of silver’s industrial demand will be well supported and will not reflect overall industrial sluggishness,” while price declines will stimulate demand from key consumers China and India, he said.

Still, headwinds to the white metal’s rally exist as the world braces for the withdrawal of stimulus and an economic downturn.

While HSBC remains positive, it has cut its forecasts as silver follows gold and copper lower.

The bank now sees the average price at $22.25 an ounce for 2022 and at $23.50 for 2023.

UBS Group expects silver to trade lower to $19 by early 2023.

Silver was trading at $20.54 an ounce by 3 p.m. in London, after bouncing back from a two-year low in mid-July.

Silver’s trajectory will closely follow gold, and investors should consider buying both metals when the Fed makes a proper dovish pivot and there’s meaningful easing of policy to support growth, said Wayne Gordon, executive director for commodities and FX at UBS Group’s global wealth management unit.

“Once we get to that recovery phase in gold, we believe silver can really outperform the yellow metal,” said Gordon.

Gold gained 0.5%, moving to $1,797.61 an ounce as the dollar edged 0.2% into the red with traders awaiting a key report on U.S. consumer inflation due Wednesday. Palladium rose while platinum fell.

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