Silver prices (XAG/USD) extended their losing streak into a fourth day, trading around $29.20 per troy ounce during the Asian session on Monday. The grey metal faces significant challenges from a slowdown in China, the world’s largest manufacturing hub. China’s industrial demand for silver is substantial due to its use in electronics, solar panels, and automotive components.
Despite the current downtrend, silver might find some support as supply constraints could limit further declines. Navneet Damani, Group Senior Vice President and Head of Commodities Research at Motilal Oswal Financial Services, highlighted that mining production has been hampered by labor shortages and environmental regulations, leading to tighter supplies. According to the Silver Institute, 2024 is projected to be the fourth consecutive year of a supply deficit.
Additionally, the dovish outlook on Federal Reserve policy could bolster silver prices. Lower interest rates often make non-yielding assets like silver more attractive to investors. The CME Group’s FedWatch Tool indicates a 91.7% probability of a 25-basis point rate cut at the September Fed meeting, up from 90.3% the previous week.
Federal Reserve Bank of New York President John Williams reinforced this sentiment on Friday, noting that long-term trends causing declines in neutral interest rates persist. Williams commented, “My own Holston-Laubach-Williams estimates for r-star in the United States, Canada, and the Euro area are about the same level as they were before the pandemic,” according to Bloomberg.
