(Kitco News) - Silver continues to see firm resistance at $34 an ounce; however, one analyst said that the precious metal’s time will come, and it could be later this year.
After hitting another brick wall last week, the silver price remains on the back foot, with prices now testing support at $33 an ounce. The precious metal is struggling as President Donald Trump continues to add to the uncertainty surrounding his proposed global tariffs. According to some reports, Trump is expected to issue more targeted and less sweeping tariffs, which would mitigate the threat of an all-out global trade war.
In an interview with Kitco News, Ole Hansen, Head of Commodity Strategy at Saxo Bank, noted that silver prices have been rallying in part due to growing demand in the U.S., as bullion banks flooded New York vaults amid fears that silver could be hit with U.S. tariffs.
Hansen pointed out that these tariff threats are benefiting gold, copper, silver, and platinum group metals. However, he added that this is very much a risky, binary trade: either the tariffs happen or they don’t.
“This coin flip makes it very difficult to navigate these markets in the short term,” he said. “I expect we will continue to see some price volatility.”
Looking through the near-term uncertainty, Hansen said that silver is unlikely to be tariffed because the U.S. relies heavily on imported supply.
Last year, U.S. mines produced more than 1,100 tonnes of silver, but U.S. demand totaled more than 5,100 tonnes. Hansen said there’s no way the U.S. could increase its domestic production enough to meet demand. The U.S. currently imports most of its silver from Mexico, with about 10% of its supply coming from Canada.
Hansen added that the complicated tariff uncertainty surrounding copper could also impact silver in the short term. Like silver, the U.S. does not produce enough copper to meet domestic demand.
“ If no tariffs are applied to copper, then there will be a lot of selling pressure in New York's futures market because if this flow continues for another few months, then in the second half of the year, we could see more than half of the visible copper stocks being relocated to the U.S.,” he said. “This market accounts for less than 10% of global demand, meaning the rest of the world accounts for the other 90%. At some point, the metal will follow real demand.”
“I see a similar situation in silver,” he added. “I don't see any short-squeeze conspiracies or anything. I just see a market that has responded to a profitable arbitrage trade.”
Hansen said that in the near term, he could see silver prices fall as low as $31.50 an ounce. He added that he is watching critical long-term support at $32.33 an ounce, but said that lower prices continue to represent buying opportunities.
Hansen expects silver prices to push above $35 an ounce and sees potential for them to rise to $40 this year. He pointed out that silver’s significant supply deficit provides solid support for prices.
“Roughly 55% of silver demand is industrial,” he said. “And that demand is, if anything, still rising. Even though decarbonization has suddenly become a swear word, the electrification of the global economy is still ongoing and gathering momentum.”
At the same time, Hansen said that he expects silver to further benefit from gold’s rally as prices hold above $3,000 an ounce. Hansen looks for gold prices to hit $3,300 an ounce this year.
“ If that's the case and we see the gold-silver ratio return to levels we saw last year, then silver could easily make it to $40 and above,” he said. “But nothing ever goes in a straight line. Silver is gold on steroids, there's no doubt about it. But it also comes with a price tag called ‘high volatility.’”
