Silver (XAG) Price Recovers Mildly on Signs of Booming Industrial Demand

Silver price recovers a bit after a yearlong downtrend

WISCONSIN (CoinChapter.com) — The price of Silver (XAG) has been slumping for most of October, but a minor turnaround occurred this week.

Notably, XAG’s price rebounded by nearly 1.5% in the week ending Oct 21, reaching $18.55 per oz. The recovery occurred a week after the US reported a higher-than-expected rise in inflation, raising fears that the Federal Reserve would continue hiking interest rates for the remainder of 2022.

Precious metals are expected to remain under pressure until the Fed puts the brakes on aggressive increases. The current policy rate is 3%-3.25%. By year’s end, traders believe the rate will reach 4.5%-4.75%.

As of today, futures prices are showing a 35% probability of rates reaching 5% by early spring 2023.

Is Silver Only Retracing, Or On An Uptrend?

Silver is down 20% year-to-date (YTD) but only 3.59% for the month of October.

Silver Continuous Contract is down 3.64% in October. Source: Google

Silver has been finding more late buyers due to increased use in industrial settings—half of the precious metal is in these areas. XAG has strong applications in consumer electronics. Additionally, we see it used in the manufacturing of solar panels.

Trading fluctuated between $22-$27 earlier in the year when the Russia-Ukraine war stoked fears that the conflict might escalate. An abrupt sell-off followed after the US dollar gained strength due to interest rate increases.

If the Fed keeps pushing with aggressive rate hikes, of which the next one is almost certainly 75 basis points, that would likely see the dollar appreciate further.

Solar Panels in Silver’s Favor

Solar panels were recently mentioned.

The growing demand for its use in PV (photovoltaic) panels is working in Silver’s favor. Simply explained, PV panels convert sunlight into electrical energy. Solar companies turn silver into a paste and then put it into a silicon wafer. The silver carries electricity through a current which reaches a building for use.

Silver is highly valued in these processes because it is the most electricity-conducting metal on earth. Silver is light, easily allowing roofs to hold a panel’s weight. Demand is very high; forecasts expect 30% growth globally this year and continuing through 2025.