Key points:
- Silver rose slightly above $31 per ounce, maintaining a sideways trading range.
- Markets are anticipating a key US inflation reading which could solidify expectations for a Federal Reserve interest rate cut in September.
- A potential supply deficit in silver for 2024 could drive prices higher, continuing a trend of market deficits for the fifth consecutive year.
Silver (Symbol: XAGUSD) prices edged above $31 per ounce, marking a slight increase as the market remains largely range bound.
The image above shows how silver has rallied in 2024, as observed on the VT Markets app.
The focus now is on the upcoming US inflation data, which could cement expectations for a Federal Reserve interest rate cut in September.
This comes after Fed Chair Jerome Powell’s testimony to Congress, where he emphasised the necessity for additional data to ensure inflation is consistently moving towards the 2% target. Powell also acknowledged the risk of maintaining restrictive policies for too long, potentially stunting economic growth.
Related articles: Interest rate tug-of-war for central banks
Anticipated supply deficit and industrial demand
The outlook for silver is also influenced by supply dynamics. A broader supply deficit in 2024 has been projected and is likely to be the fifth consecutive year of market shortages. In 2023, the silver market experienced a shortfall of 142 million ounces.
This deficit is expected to nearly double to 265 million ounces in 2024, driven by increasing industrial demand.
Industrial use now accounts for 64% of global silver consumption, spurred by sectors such as green energy, artificial intelligence, and electric vehicles. This growing demand is expected to support higher silver prices in the medium to long term.
Market sentiment and opportunities
Market sentiment remains cautiously optimistic. The anticipation of a potential rate cut by the Federal Reserve, coupled with strong industrial demand, creates a favorable environment for silver.
Day traders can capitalise on intraday price swings by closely monitoring market news and technical indicators. With silver prices hovering around $31 per ounce, scalping can be a good choice to consider.
Further, a decisive move above this level could signal a potential breakout, providing a lucrative entry point for traders. Nonetheless, it is essential to remain cautious and keep risk management intact when navigating the silver market.
