TD Securities’ commodity team reports that silver prices have already experienced a significant decline since the onset of the recent conflict, falling by $21 per ounce, which represents a 22% drop. This decline is attributed to rising inflation expectations, concerns about stagflation, and the prospect of higher interest rates across the yield curve, all of which have weighed heavily on both precious and base metals. For comparison, gold has fallen approximately $700 per ounce (a 13% decrease), while copper prices have remained flat despite a deep market deficit [1].
The report highlights that if inflation continues to slow economic growth and increases the cost of carry, silver could see further sharp declines. A weakening economy is expected to reduce industrial demand for silver, while higher interest rates may erode investor interest. These combined forces could diminish the currently projected market deficit for silver, potentially moving the market toward balance and causing prices to gravitate closer to the marginal cost of production [1].
Despite these near-term headwinds, TD Securities anticipates a possible recovery for silver later in the year. Once the oil shock subsides, the structurally weak supply side is expected to reassert itself, which could lead to a recovery in both industrial and investment demand. This scenario may materially widen market deficits and push silver prices higher toward the end of the year [1].
CONCLUSION
TD Securities sees further downside risk for silver in the near term due to inflation-driven economic slowdown and higher rates, which could erode demand and market deficits. However, the firm expects a potential recovery later in the year as supply constraints and renewed demand may support higher prices. Investors should remain cautious in the short term but watch for signs of a turnaround as macroeconomic pressures ease.