Silver Price Forecast: Increasing Demand Challenges Silver Supply

Highlights

• Silver prices rise amid thin trading during U.S. holiday.
• Traders anticipate insights from the Fed’s June meeting minutes.
• Increasing demand from solar panel industry challenges silver supply.

Overview

Silver prices inched higher on Tuesday amidst thin trading due to a U.S. holiday. Traders eagerly awaited the release of the U.S. Federal Reserve’s minutes from the June meeting on Wednesday for insights into the future path of interest rate hikes.

Currently, there is a nearly 90% probability of a 25-basis-point hike in July, pushing rates into the range of 5.25% to 5.50%. This expectation has led to cautiousness in non-yielding gold investments. Furthermore, the market will closely monitor the minutes of the June FOMC meeting.

Rising Silver Demand Fueled by Solar Panel Industry’s Evolution

On another note, changes in solar panel technology are fueling the demand for silver and exacerbating the supply deficit of the metal. Silver, in paste form, is used as a conductive layer on both the front and back of silicon solar cells. However, the industry is now transitioning to more efficient cell designs that require a significantly larger amount of silver. As a result, silver consumption is expected to rise, with solar making up around 14% of overall demand this year, compared to just 5% in 2014. China is a key contributor to this growth, projected to install more panels in 2023 than the entire United States.

Limited Supply Facing Challenge

Peter Krauth, the editor of SilverStockInvestor, warns that the surge in demand from solar panel manufacturers may overwhelm the limited supply of silver as early as this year. Current forecasts for silver supply and demand have already underestimated the impact of the solar industry, which is growing rapidly due to tax incentives and the affordability of solar energy, particularly in China. Additionally, the shift towards more efficient solar panel technologies that require higher amounts of silver will further strain the supply. Krauth emphasizes that the supply of silver is inelastic, meaning it is unlikely to respond quickly to price increases.

Short-Term Outlook:  Short-Covering Ahead of Fed Minutes

In conclusion, silver prices are experiencing a slight increase amid limited trading. Traders are eagerly awaiting the release of the Fed’s meeting minutes for insights into future interest rate hikes. Meanwhile, changes in solar panel technology are driving the demand for silver, with China significantly contributing to the growing market. Peter Krauth highlights the potential strain on the limited supply of silver due to increasing demand from solar panel manufacturers, which may outpace current forecasts. Overall, the silver market faces challenges as it navigates the dynamics of supply and demand.

Technical Analysis

The market sentiment for Comex Silver is currently showing a mixed outlook. The price of silver has slightly increased from the previous session, indicating a modest upward movement. While the 50-4H moving average suggests a bullish sentiment, the price remains below the 200-4H moving average, indicating some bearish pressure. The 14-4H RSI falls within the neutral range, suggesting a lack of extreme buying or selling conditions. Additionally, the market is consolidating within the main support and resistance areas. Overall, the market sentiment for Comex Silver can be characterized as neutral to slightly bullish, reflecting a sense of uncertainty in the market.