Rising Bond Yields, Falling Industrial Demand Behind Slumping Silver Prices

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Prices completed their worst four-month run since November 2014

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Silver is both a precious metal and an industrial commodity, used in a wide variety of products such as jewelry, solar panels and semiconductors. Now, precious metals prices are hurting by the imminent rollback of pandemic monetary-stimulus measures, with global production bottlenecks, energy shortages and a manufacturing slowdown weighing down industrial demand.

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Prices, which slipped 0.3% to $22.51 on Wednesday, are standing near their lowest level in a year, making silver one of the worst-performing assets for 2021 in the group tracked by the Wall Street Journal. Shares of miners like First Majestic Silver Corp..

and Hecla Mining Company.

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It fell more than 25% last quarter, while the Global X Silver Miners ETF declined nearly 18%.

“Right now, all precious metals are reacting to a combination of lower-than-expected industrial demand and Fed policy changes and a stronger dollar; all of those things have created a cocktail for negative metals,” said HSBC Chief Precious Metals. said analyst James Steele.

When investors expect economic growth and inflation, silver and gold tend to decline, increasing the appeal of riskier assets such as stocks, or income-paying bonds, such as bonds. The fall intensified in September when the Federal Reserve signaled it was ready to resume asset purchases in November and raise interest rates next year amid the risk of a larger-than-expected jump in inflation. Gold, down 0.9% in the last quarter, is one of the worst-performing assets of the year.

Recent gains in bond yields have fueled a rise in the US dollar, which is also weighing on metals including silver, making the dollar more expensive for overseas buyers.

The Businesshala Dollar Index, which tracks the currency against a basket of 16 others, is trading near its highest level in over a year.

Hedge funds and other speculative investors have recently become more cautious on silver, cutting net bets on high silver prices to their lowest levels since June 2019, according to data for the week of September 21 from the Commodity Futures Trading Commission. are.

Although US stocks have declined recently, many expected rebounding growth to support the major indices, and a year later the S&P 500 hit dozens of records.

Hakan Kaya, Commodity Portfolio Manager, Neuberger Berman, said, “In a growth-friendly regime, it is going to be difficult for silver and gold.

The recent selloff is a reversal from earlier this year, when day traders piled into the silver market and helped propel the price to $29.40. Silver posted its biggest one-day advance in more than a decade earlier this year, but has since lost nearly 25% in price.

Suki Cooper, a precious metals analyst at Standard Chartered, said one factor in silver’s jump at the start of the year: an increase in infrastructure spending will help drive rapid growth in the use of renewable-energy sources. Silver is used in solar panels.

Ms Cooper said if industrial trends improve and chip shortages ease, silver prices will improve, making the metal’s outlook healthier in the long term.

“Silver was bought very quickly in anticipation of meeting that demand, so given that these developments will take years to unfold, there is naturally going to be a decline in investor interest as they enter the market quickly. Were gone,” said Ms. Cooper.

Write to Hardik Singh at [email protected]


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