Silver Price Volatile as Coronavirus Fears Heighten

Silver has been volatile this week, surging to a near three year high of US$18.77 per ounce, then plunging below US$18 as the 50th country outside of China reported COVID-19 coronavirus cases.

The white metal had been following gold’s lead of trending higher thanks to its safe haven nature. However, as the death toll continues to climb — now surpassing 2,700, with more than 82,000 cases worldwide — investors are flocking to gold over its sister metal.

By midday on Thursday (February 27), silver had slipped 5.8 percent from its high to US$17.68.

The silver price is also being weighed down by its close correlation to so many industrial sectors.

As China’s economy begins to register the impact of shutdowns caused by COVID-19, analysts at German firm Heraeus expect the solar sector, where silver is used in paneling, to be one of the first industries to display the effects of what some are calling an “economic pandemic.”

In its Precious Appraisal for February, Heraeus notes that the virus could ultimately reduce silver demand for 2020.

“The industry faces additional headwinds from an already weak economy and uncertainty over developers’ reactions to moving further away from a subsidy-driven market,” it states. “The outlook for China is now much less optimistic than it was only a few months ago.”

Due to the highly globalized nature of business and China’s role at the center of so many supply chains, the long-term impact of COVID-19 could be felt beyond Q2 2020.

“China is the largest photovoltaic (PV) silver market in the world, accounting for over a third of annual installations and the majority of manufacturing globally,” the report continues.

In 2018, the global PV industry comprised 8 percent, or 80.5 million ounces, of physical silver demand. Of that amount, 30.9 million ounces were used in the Chinese market, adding approximately 40 gigawatts of solar capacity to the country.

Production of PV panels is expected to decline for the first half of the year, as many of the factories that produce them in China were closed for two weeks or more at the beginning of 2020.

“While many factories have since reopened, the China Photovoltaic Industry Association expects output to be curtailed until mid-year at the earliest, with recovery from Q3,” states Heraeus in its note.

If the spread of COVID-19 is not contained, the price of silver could continue to fall as it bears the brunt of two storms: investors bypassing it for its shinier, high-value precious metal counterpart and decreasing demand from industrial applications.

As of 3:05 p.m. EST on Thursday, an ounce of silver was selling for US$17.65.

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.