Silver tested the $30 milestone twice during its drawback in November. Both times, prices rebounded decisively as investors rejected any sustained moves beneath the psychological support level.
The dynamic formed in the first half of September, when the white metal gained enough momentum to break through $30 for the first time since July.
Since then, silver has bottomed four times at $30 in two separate instances that led to a notable run higher, the last of which preceded a rally to nearly $35 an ounce.
Solar panels, tariffs, and a new administration
Under U.S. President Donald Trump’s first term in office, his administration unveiled sweeping tariffs against Chinese solar imports, an initiative that current President Joe Biden continued for the past four years.
Solar panel production is one of the largest sources of demand in the silver market, and China accounts for 80% of the global supply of panels.
The trade war against Chinese panels began under the Barack Obama administration, during which the U.S. supply of panels from China dropped to about 10%. Under Trump, that number approached zero, where it remains today. Instead, the U.S. relies on Vietnam, Cambodia, Malaysia and Taiwan for its solar panel needs.
This significant boost in demand has caused localized silver shortages and helped to increase prices due to the volatile nature of the ongoing trade battle.
Geopolitical climate a temporary factor
Precious metals experienced a brief bear market in November following the election of Trump and rising hopes of a successful ceasefire agreement between Israel and Hezbollah. On Tuesday, those hopes became a reality when Israeli Prime Minister Benjamin Netanyahu announced a deal had been reached. Still, he warned Hezbollah it would respond “with force” if the agreement is violated.
In Eastern Europe, Russian President Vladimir Putin is continuing his nearly three-year-long invasion of Ukraine, and tensions are rising by the day as the United States prepares for its change in power.
In November, the U.S. announced it would permit Ukraine to use Western-produced missiles to attack Russia, a move that brought several responses from Putin, one of which included a relaxation of regulations governing the use of nuclear weapons.
Israel agreed to the ceasefire deal with Lebanon under the condition that it is still permitted to attack Hamas in Gaza and other locations.
Despite the positive news in the Middle East, precious metals investors will likely shrug off the recent developments as a wash, given the increasing tensions in the East.
Nevertheless, it’s clear by the actions of central banks, which have been buying gold en masse since 2022, that the world is likely in for a time of more political turmoil in violence instead of less.
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