Silver Price Forecast Amid Concerns Over Slow Global Growth

May 17, 2022 11:19 AM ET
Silver Price Forecast Amid Concerns Over Slow Global Growth
  • Silver price is on a rebound following the easing of the US dollar rally.
  • A strong greenback and concerns over slow global growth continue to curb its gains.
  • On the data front, investors await the US industrial production and retail sales figures.

The silver price has edged higher in Tuesday’s session after rebounding from the two-year low of $20.49 it hit on Friday. The easing of the US dollar rallying is largely behind the bounce back. Nonetheless, a strong greenback and concerns over slow global economic growth will likely continue its gains for the remainder of the week.

The silver price chart  

Global growth 

Even with the recorded rebound, the silver price remains in a downtrend, trading below the crucial support-turn-resistance level of $22.00 for about a week now.  One of the market’s major bearish drivers is the heightened concerns over slowed global growth. In addition to the inflationary pressures, COVID-19 lockdowns in China have added to the woes. These concerns have boosted the US dollar while weighing on silver. As is the case with other commodities, the precious metal moves inversely to the value of the greenback as it makes it more expensive for buyers holding other currencies.

Besides being a precious metal, silver is also an industrial metal whose uses span from electrical to manufacturing subsectors. As such, prospects of slowed global growth have investors concerned over the demand for silver and other industrial metals. 

Data released on Monday showed that China’s industrial production declined by 2.9% in April on a year-on-year basis after increasing by 5.0% in the previous month. Analysts had predicted a lesser increase of 0.4%. Furthermore, the Chinese retail sales dropped by 11.1%, close to double the expected decline of 6.1%. In the ensuing sessions, the market will also be reacting to the US industrial production figures scheduled for release on Tuesday. 

Strong US dollar

The ongoing rallying of the US dollar has also been a key bearish driver for the silver price. Heightened inflationary pressures, the ongoing Russia-Ukraine war, and bets of aggressive policy tightening by the Fed are the main factors behind the strong greenback. Seeing that these aspects may remain at play much longer, the dollar will likely stay strong for much longer, a situation that will weigh on silver and other precious metals. 

Granted, the easing of the US dollar in the new week has offered some support to the silver price. As of the time of writing, the dollar index was at $103.96 after pulling back from the 20-year high of $105.00 hit on Friday. In the short term, the greenback - and silver price by extension - will be reacting to the US industrial production and retail sales data set for release on Tuesday. 

Silver price’s downtrend has also been sustained by the rising Treasury yields. After dropping to a two-week low of 2.81% in the past week, the benchmark 10-year yields have bounced back to 2.92%. For over two months now, it has held steady above the psychological level of 2.00%. Notably, the yields surged past this zone after the Fed hiked interest rates for the first time in over three years. Rising Treasury yields usually increase the opportunity cost of holding non-yielding assets such as silver.

Silver price technical outlook

Silver price is on a rebound, even as its gains remain curbed. It is still below the 25 and 50-day exponential moving averages, as seen on a daily chart.  

Based on both the fundamentals and technicals, the range between 22.00 and21.43 will be worth watching in the short term. On the lower side, a pullback past the range’s lower border may have the bears retest the support at 20.85 or lower at 20.50.

The silver CFDs daily price chart indicates a downward trend since the last decade of April

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