Silver price’s rally has accelerated over the past weeks. Currently trading at US$ 22.65/oz, price has jumped +27% ytd. Yet, much of the gains (22% out of 27%) was made in the first three weeks of July. With its dual properties, as both industrial and precious metals, silver will continue to benefit from global economic recovery amidst high uncertainty.
On the demand side, industrial demand takes up about 50% of total silver consumption. Silver as an industrial metal allows the price to benefit from global economic recovery. The latest report by Markit reveals that global manufacturing PMI jumped +7.9 points to 47, the highest since January, in June. The index, rebounding from the record low of 32.5 in April, signals that the worst of global economy is behind us, although the pace is divergent among different countries. China’s economic recovery has gathered momentum. This bodes well for silver price as China is the largest consumer of white metal in terms of industrial demand.
Silver’s supply is contributed by mine production, recycling, hedging supply and official sector sale. Of which mine production takes up an overwhelmingly 80%. Mine supply has been disrupted in Mexico and Peru, the two largest miners taking up about 40% of global output, amidst governments’ restrictive measures to curb the spread of the virus since early March. Although operations have largely resumed, it takes time for production return to full capacity.