TD Securities’ commodity analysis indicates that silver prices have seen a significant decline since the onset of recent geopolitical tensions, and further decreases could follow if inflation dampens growth and raises carrying costs. The firm cautions that diminished industrial demand, coupled with increasing interest rates, might undermine the anticipated deficit in silver. However, they project a recovery later in the year, as the effects of the oil shock diminish and supply constraints become more pronounced.
Industrial Metals Confront Cyclical Challenges
The impact of inflation on the economic landscape is expected to intensify, leading to rising inflation expectations. This situation may stir fresh concerns regarding stagflation and escalating interest rates across the yield curve. Such anxieties have had a considerable impact on both precious and base metals markets. Since the onset of conflict, gold has plummeted approximately $700/oz (a 13% decrease), silver has dropped by $21/oz (22% fall), while copper prices have remained relatively stable despite a significant market deficit.
Analysts predict that silver could face further declines if inflation slows economic activity and increases carrying costs. An economic downturn would likely curb industrial demand, and rising interest rates could diminish investor enthusiasm for silver.
These combined factors could lead to a reduction in the initially projected deficit for silver, moving the market closer to a state of balance. This may imply that prices could align more closely with the marginal cost of production. Nonetheless, once the oil price shock subsides, the ongoing structural supply weaknesses are likely to stimulate a recovery in both industrial and investment demand. This resurgence could significantly widen deficits and ultimately drive prices higher later in the year.
This article has been produced with the assistance of an AI tool and subsequently reviewed by an editor.
